The commercial finance guide.

Commercial lending is priced and sized on different metrics than residential. LVRs are lower (typically 65-75%), terms are shorter (3, 5 or 10 years), and lenders care about Interest Cover Ratio — the ratio of the asset's net rental income to the loan's interest expense. Most lenders want ICR of 1.3x to 1.5x. Covenants (debt service coverage tests, LVR triggers, financial reporting obligations) are baked into facilities. Breaching a covenant is rarely a default-by-itself but always a conversation with the lender you'd rather not have.

Lender appetite varies massively by asset class. Industrial and logistics property near ports and freeways is the strongest asset class right now — wide lender panel, competitive pricing. Office is two-tier: CBD grade A is well-supported, suburban office is harder. Retail is tenant-dependent. Specialised assets (hotels, service stations, childcare, agriculture) are the territory of specific lenders who know those categories. Part of the broker's job is knowing which lender leads which category.

Development deals are financed across a stack: senior debt, mezzanine, preferred equity, developer equity. Senior debt is the cheapest layer and the lowest LVR. Mezzanine fills the gap between senior and equity at a higher rate and often with equity kickers. Preferred equity and pure equity sit at the top taking the highest risk and return. Structuring the stack well is a specialist skill — see our development finance page.