Key takeaways
- The short answer: Most purchases need 20% to 35% of value, because lenders generally cap the loan at 65% to 80% of what the property is worth.
- Owner-occupiers do best: A trading business buying premises it will occupy is the strongest case a commercial lender sees, and can reach the 80% end of that range.
- The deposit is not the full cash bill: Stamp duty, legal fees, due diligence and lender costs commonly add another 5% to 8% on top.
- Valuation sets the number, not the contract: Your deposit is calculated from the lender's valuation, so a low valuation increases the cash you must find.
- Equity can do the work of cash: Usable equity in property you already own can stand in for part of the deposit.
Buying your own premises turns your largest ongoing expense into an asset on your balance sheet. The question that stops most owners before they get that far is simple: how much cash do I actually need? The answer is bigger than a home loan deposit and less fixed than people expect, because commercial lending is negotiated deal by deal rather than run off a standard calculator.
Why commercial lenders ask for more
Commercial property carries risks a house does not. If a tenant leaves, the space can sit empty for months, and the pool of buyers is smaller, so a forced sale recovers less. Lenders price that in by advancing a smaller share of the value, and the gap between that share and the price is your deposit.
Funding costs also sit higher than two years ago. The Reserve Bank left the cash rate target at 4.35% in June 2026 after three increases earlier in the year, noting that financial conditions have tightened as a result. That flows into pricing and into serviceability testing: a lender will test the loan at a buffered rate and want business earnings to cover it comfortably.
What deposit you actually need
Loan to value ratio, or LVR, is the loan expressed as a percentage of the lender's valuation. Treat the bands below as a planning guide rather than a quote, since the asset, location and your financials all change where you land.
| Purchase type | Typical LVR | Deposit required |
|---|---|---|
| Owner-occupied, strong trading business, quality industrial or office asset | up to 80% | from 20% |
| Owner-occupied, standard profile | 70% to 75% | 25% to 30% |
| Commercial investment, leased to a third party | 65% to 70% | 30% to 35% |
| Specialised assets such as childcare, venues or rural property | 50% to 65% | 35% to 50% |
Industrial property currently attracts the most favourable treatment, because vacancy is low and warehouses re-let quickly. Office and retail is funded more cautiously. The biggest lever in your control is the strength of the trading business behind the application.
The costs that sit on top
Plenty of purchases stall because the buyer budgeted the deposit and nothing else:
- Stamp duty: Usually the largest extra cost, calculated by your state revenue office on the purchase price.
- GST: Commercial sales generally attract GST, unlike residential. The ATO confirms you can claim the GST in the price if you buy premises to use in your GST-registered business, but you still fund it at settlement and wait for the credit.
- Due diligence: Legal fees, building inspections, environmental reports on industrial sites, and lease reviews if the property is tenanted.
- Lender costs: Valuation, application and legal fees, charged on commercial deals in a way they often are not on home loans.
- A trading buffer: Emptying the business account to settle is how a good purchase becomes a cash flow problem in month two.
A realistic scenario
Take a fabrication business under contract on a $1.2 million warehouse it intends to occupy. At 70% LVR the loan is $840,000 and the deposit is $360,000, with roughly $60,000 to $96,000 in duty and costs on top.
Then the valuation lands at $1.15 million. The lender still advances 70%, but of $1.15 million, so the loan drops to $805,000 and the cash required climbs to $395,000. That $35,000 gap appears late, after the contract is signed, which is exactly why valuation risk is worth discussing before you commit. In this case the owner covered it by offering usable equity in an existing property as additional security rather than finding more cash. Once settled, the fitout works were funded separately through office fitout finance so the deposit did not have to stretch further.
Ways to reduce the cash you need
- Use equity you already hold: Equity in a home or another commercial property can be taken as additional security, cutting the cash deposit substantially.
- Lead with the trading business: Clean financials, current tax lodgements and a clear reason the premises suit the operation are what lift you toward the top of the LVR range.
- Ask about an interest-only period: A short interest-only term after settlement preserves cash while you complete a relocation or fitout.
- Match the lender to the asset: Appetite varies widely, and the difference between a 65% and an 80% offer on the same property is often just which lender assessed it.
That last point is where a broker earns their place. A specialist knows which funders are competitive on your asset class right now and presents the application in the form each one wants to see, rather than leaving you to approach lenders one at a time.
Frequently asked questions
Can you buy commercial property with a 20% deposit?
Yes, but it is the exception rather than the rule. An 80% LVR is generally reserved for owner-occupiers with strong, well-documented trading performance buying a mainstream asset such as a warehouse or a well-located office. Most purchases land closer to 70% or 75%.
Does the deposit come off the contract price or the valuation?
The loan is calculated on the lender's independent valuation. If the valuation comes in below the contract price, the shortfall is added to your deposit. On larger purchases this is the most common late surprise.
Do I need to pay GST on top of the purchase price?
Commercial premises are generally a taxable supply, so GST usually applies unless the sale is a GST-free going concern. A GST-registered buyer can normally claim it back, but you have to fund it at settlement first. Confirm the treatment with your accountant before you sign.
What matters most
Plan on 20% to 35% of value as a deposit, add 5% to 8% again for duty and costs, and keep a trading buffer beyond that. Two things then decide your outcome: how strong the trading business looks on paper, and whether the lender assessing it has appetite for your asset class. Get the financials in order early, understand the valuation risk before you sign, and compare structures across lenders rather than accepting the first LVR you are offered.
This article is general information only and does not take your circumstances into account. Speak with your accountant or a licensed adviser before making a finance decision.
Working out how to fund a deposit without stripping cash out of the business? Compare working capital options across 50 or more lenders here.