If you're ready to expand your business, the finance structure you choose will shape how smoothly that growth happens.
Many business owners in Bayside reach a point where expansion requires capital. That might mean acquiring a warehouse in Moorabbin, upgrading equipment for a retail shopfront in Brighton, or securing premises to consolidate operations. The right commercial finance structure depends on what you're acquiring, how quickly you need to settle, and how your cashflow operates.
Secured vs Unsecured Commercial Finance
A secured commercial loan uses property or equipment as collateral, which usually results in lower interest rates and higher loan amounts. An unsecured option relies on your business's financial position and typically suits smaller funding needs or situations where you don't want to encumber existing assets.
Consider a business owner looking to buy an industrial property in Cheltenham. A secured loan against that property allows them to borrow up to 70% of the valuation, with repayment terms extending to 30 years. The interest rate sits lower because the lender holds security over the asset. In contrast, if the same business wanted $80,000 for new equipment without tying up property, an unsecured facility might suit better despite the higher rate.
The decision hinges on whether you have an asset to secure against and whether the cost difference justifies the encumbrance. Secured lending works when you're purchasing property or have existing real estate to leverage. Unsecured works when speed and simplicity matter more than rate.
How Loan Structure Affects Your Cashflow
Loan structure determines how you draw down funds and how repayments align with your income. A progressive drawdown suits construction or fitout projects where you pay in stages. A revolving line of credit suits businesses with fluctuating income who need access to funds on demand. A standard principal and interest loan suits straightforward property purchases with predictable cashflow.
A Bayside hospitality business expanding into a second location in Hampton might use progressive drawdown for the fitout, drawing funds as the builder invoices. This means interest only accrues on the amount drawn, not the full approved limit. Once the fitout completes and revenue starts flowing, they switch to principal and interest repayments.
If your income fluctuates seasonally or project-based, a revolving line of credit lets you draw and repay as needed. If your income is steady and you're purchasing an asset outright, a fixed repayment schedule makes budgeting straightforward.
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Variable or Fixed Interest Rates for Commercial Finance
Variable interest rates move with the market, which means your repayments can increase or decrease. Fixed interest rates lock in a rate for a set period, usually one to five years. Variable rates typically sit slightly lower and offer flexibility with redraw and extra repayments. Fixed rates provide certainty but often come with restrictions on early repayment.
In our experience, business owners choosing variable rates value the ability to make extra repayments when cashflow allows, particularly if they expect revenue growth. Those choosing fixed rates want predictable budgeting and protection against rate rises during a defined expansion phase.
You can also split the loan, fixing part and leaving part variable. This balances certainty with flexibility. A business purchasing a retail property in Sandringham might fix 60% of the loan to lock in repayments, leaving 40% variable to allow extra repayments from strong trading periods.
Commercial LVR and Deposit Requirements
Commercial LVR, or loan-to-value ratio, determines how much you can borrow against a property's valuation. Most lenders offer up to 70% LVR for commercial property, meaning you need a 30% deposit plus costs. Some lenders extend to 80% LVR depending on the property type and your business's financial position, but this usually attracts a higher interest rate or requires additional security.
A commercial property valuation differs from residential. Valuers assess rental income potential, lease terms, tenant quality, and location. A strata title commercial unit in Mentone with a long-term tenant will typically value more favourably than a vacant warehouse requiring significant outlay.
If you're acquiring commercial land without an income-producing asset on it, lenders often cap LVR at 60% to 65%. The deposit requirement increases because raw land carries more risk from the lender's perspective.
Accessing Commercial Loan Options Across Multiple Lenders
Different lenders assess commercial finance differently. Some specialise in retail property finance, others in industrial property or office buildings. Some prioritise strong business financials, others focus on the property's income potential. A commercial mortgage broker can access options across banks and non-bank lenders, which widens your choice and often improves the rate or terms you're offered.
We regularly see situations where one lender declines a proposal while another approves it without hesitation. That's usually because their assessment criteria or appetite for certain property types differ. Comparing options also means you're not locked into a single rate or structure.
If your business operates in a niche industry or the property type is unusual, a broker who works across multiple lenders will find the right match faster than approaching banks individually.
How Commercial Refinance Can Support Expansion
If you already own business property, commercial refinance can unlock equity to fund expansion without selling the asset. Refinancing also allows you to restructure loan terms or switch to a lower interest rate if your business position has strengthened.
A business owner in Highett owns a warehouse purchased several years ago. The property has increased in value, and the existing loan has been paid down. By refinancing, they access equity to fund a second warehouse purchase without needing a large cash deposit. The existing property secures the new loan, and the rental income from both properties services the debt.
Refinancing also works when your current loan structure no longer suits your business. Switching from a principal and interest loan to interest-only during a growth phase can free up cashflow for operations or marketing.
When to Use Commercial Bridging Finance
Commercial bridging finance covers the gap when you need to settle on a new property before selling an existing one, or when you need fast access to capital while arranging longer-term funding. Terms usually range from one to 24 months, and the interest rate sits higher than standard commercial loans because of the short-term nature and higher risk.
This suits time-sensitive opportunities. A business owner spots a retail property in Black Rock that fits their expansion plan, but settlement is required in 30 days and their current property hasn't sold yet. Bridging finance allows them to proceed with the purchase, then refinance into a standard loan once the existing property sells.
It also works when you're securing a property at auction or need to move quickly on an off-market opportunity where the seller won't wait for standard approval timeframes.
Flexible Repayment Options and Redraw Facilities
Flexible repayment options let you adjust how and when you repay the loan. Redraw lets you access extra repayments you've made, which works well for businesses with variable income. Interest-only periods reduce repayments during the early stages of expansion when cashflow is tight.
A business purchasing an office building in Bentleigh East might negotiate a two-year interest-only period while they lease up the tenancies. Once rental income stabilises, they switch to principal and interest repayments. If the business has a strong quarter and wants to pay down debt faster, redraw allows them to access those funds later if needed for working capital.
Not all commercial loans include redraw or flexible repayments, particularly fixed rate loans. If you anticipate needing this flexibility, confirm it's included before committing to a loan structure.
Expanding your business with the right finance structure means you can focus on growth rather than cashflow constraints. Whether you're acquiring property, upgrading equipment, or consolidating operations, matching the loan structure to your business model makes the process smoother. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
What is the typical LVR for a commercial property loan?
Most lenders offer up to 70% LVR for commercial property, meaning you need a 30% deposit plus costs. Some lenders extend to 80% LVR depending on the property type and your business's financial position, though this usually attracts a higher interest rate.
Should I choose a secured or unsecured commercial loan?
A secured loan uses property or equipment as collateral and typically offers lower interest rates and higher loan amounts. An unsecured loan relies on your business's financial position and suits smaller funding needs or situations where you don't want to encumber assets.
When would I use commercial bridging finance?
Commercial bridging finance covers the gap when you need to settle on a new property before selling an existing one, or when you need fast access to capital while arranging longer-term funding. Terms usually range from one to 24 months with higher interest rates due to the short-term nature.
How does a progressive drawdown work for business expansion?
A progressive drawdown allows you to draw funds in stages as a project progresses, such as during construction or fitout. Interest only accrues on the amount drawn rather than the full approved limit, which helps manage cashflow during the expansion phase.
Can I refinance commercial property to fund expansion?
Yes, if you own business property that has increased in value or you've paid down the loan, refinancing can unlock equity to fund expansion. This allows you to access capital without selling the asset, using the existing property to secure additional funding.
