How Much Deposit for a Commercial Property? | DeMarque

“How much deposit do I need for a commercial property?” is usually the first question a would-be purchaser asks — and the honest answer is that it depends on the loan-to-value ratio (LVR) a lender will offer against that particular property, for that particular borrower. Commercial lending has no single deposit rule. What it has is a logic, and once you understand it, you can read your own scenario fairly accurately.

This guide covers how lenders size deposits, why the security type matters so much, the difference between owner-occupied and investment scenarios, and how existing equity can stand in for cash.

LVR: The Number That Sets Your Deposit

The deposit conversation is really an LVR conversation. LVR is the loan amount as a percentage of the property’s value (lender-assessed, not contract price — the lower of the two usually governs). Whatever the lender won’t fund is your deposit, plus transaction costs — stamp duty, legal fees and valuation — which sit on top and are easy to underestimate on commercial purchases.

As a general market guide only — individual lender policy varies widely and nothing here is an offer of terms:

• Standard commercial property — office, retail, industrial units and warehouses in reasonable locations — commonly attracts LVRs somewhere in the broad range of 60–80%, implying deposits of roughly 20–40% plus costs.

• Specialised property — pubs, childcare centres, service stations, purpose-built medical or aged-care assets — is generally funded at materially lower LVRs, because the lender’s exit depends on a narrower buyer pool. Deposits step up accordingly.

• Residential-secured lending for business purposes can reach higher LVRs than commercial security supports, which is why directors’ homes and investment properties so often appear in commercial structures.

Where a scenario lands inside (or outside) those ranges is driven by the lender’s assessment of everything else: the borrower, the income, the location and the loan type. Treat the ranges as a way of framing the conversation, not as anyone’s quote.

DMF Insight: Borrowers fixate on the maximum LVR; lenders price the whole scenario. A deal pitched slightly below a lender’s ceiling — with a genuine buffer — often gets sharper pricing and an easier approval than one stretched to the last percentage point.

How LVR Translates Into Cash — An Illustration

The arithmetic is worth seeing, because the gap between a 75% scenario and a 60% one is far larger in cash terms than it looks in percentage terms. The table below is illustrative arithmetic on a hypothetical $1,500,000 assessed value — it is not a quote, a lender offer, or a suggestion that any of these LVRs is available for your scenario:

If the lender funds	Loan	Deposit required	On top of the deposit
80%	$1,200,000	$300,000	Stamp duty, legals, valuation, lender fees
75%	$1,125,000	$375,000	Same again
70%	$1,050,000	$450,000	Same again
65%	$975,000	$525,000	Same again
60%	$900,000	$600,000	Same again

Fifteen points of LVR is $225,000 of cash on a deal this size. That is the real reason security type matters so much: the difference between standard commercial and specialised security is rarely a small adjustment at the margin — it can double the cash the deal requires.

The Valuation, Not the Contract, Sets the Number

One detail catches out most first-time commercial buyers. LVR is calculated against the lender’s assessed value, not what you agreed to pay, and where the two differ the lower figure generally governs. If you contract at $1,500,000 and the valuation returns $1,400,000, a 70% lend produces $980,000 rather than $1,050,000 — and the missing $70,000 comes from you, not from the lender. The loan didn’t shrink because your position changed; it shrank because the security did.

That risk is highest on specialised assets, on properties with limited recent comparable sales, and in markets that have moved quickly. It is why an early view on likely valuation range is worth having before you’re contractually committed, and why a deal structured with a buffer survives a soft valuation while a deal stretched to the ceiling does not.

What the Deposit Has to Cover Beyond the Price

The deposit is the largest number, but it isn’t the only one, and commercial transaction costs are consistently underestimated:

• Stamp duty — the biggest single add-on, and it varies by state and by the nature of the transaction. Check your state’s revenue office rather than assuming a figure from another jurisdiction.

• Legal and conveyancing costs — commercial contracts, lease reviews and security documentation are more involved than a residential settlement, and priced accordingly.

• The lender’s valuation — ordered by the lender, paid by you, and on specialised or development-style assets it can be a substantial line item rather than a nominal one.

• Lender establishment and line fees — set per facility, and worth comparing across lenders alongside the rate rather than after it.

• GST — whether it applies, and whether it can be handled through the margin scheme or a going-concern treatment, depends entirely on the transaction. It is a question for your accountant before you exchange, not after.

DMF Insight: The commonest funding shortfall we see isn’t a declined loan — it’s a buyer who budgeted the deposit precisely and then met the costs. Build the whole funding position, not just the deposit, before you make an offer.

Can You Buy Commercial Property With No Deposit At All?

Not in the sense of a lender funding 100% against the purchase alone. What is genuinely possible is a purchase with no cash deposit, where the shortfall is covered by security instead: additional property offered alongside the purchase, or equity released from an asset you already hold. The lender is still lending against a conservative overall LVR — it is simply measured across a larger security pool.

The distinction matters because the two are often described in the same words and carry very different consequences. No-cash-deposit structures preserve your liquidity but increase what is at stake if the position deteriorates, and cross-collateralised security is considerably harder to unwind later than it is to put in place. That is a structuring decision worth taking deliberately rather than by default.

Doc Type Moves the LVR Too

How you evidence income changes the leverage available, not just the paperwork:

• Full-doc — complete financials and tax returns. The widest lender choice and generally the strongest LVRs.
• Lease-doc — the property’s rental income assessed against the proposed repayment, with limited reliance on your wider financials. Suits leased investment property.
• Low-doc — alternative evidence such as BAS, bank statements or an accountant’s declaration, depending on lender policy. Generally met with a more conservative LVR, which means a larger deposit for the same property.

None of these is a lesser product; they are different evidence routes to the same decision. But if your financials are behind or your structure is complex, the deposit implication is real and worth knowing before you start looking, because it changes your budget rather than just your paperwork.

Owner-Occupied vs Investment

Lenders distinguish between a business buying its own premises and an investor buying for rental income.

Owner-occupied purchases are assessed primarily on the trading business’s cash flow: can the business afford the repayments in place of (or compared to) its rent? Established businesses buying sensible premises are a favoured asset class for many lenders, and appetite — including LVR — is often at its strongest here.

Investment purchases are assessed primarily on the property’s income: lease quality, tenant strength, lease term remaining (WALE on multi-tenant assets), and the sustainability of the rent. A strong lease profile can carry a deal; a vacant or short-lease property pushes the assessment back onto the borrower’s other income and usually onto a more conservative LVR.

The same property can therefore support different funding depending on who is buying it and why — which is worth knowing before you negotiate the purchase.

Want to Test Your Scenario Before You Commit?

Use our 2-minute pre-assessment tool to get a clearer view of the commercial property funding options that may suit you — and try our borrowing power calculator for a first read on capacity.

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Using Equity Instead of Cash

The deposit doesn’t have to be cash in a bank account. Equity in property you already hold — commercial or residential — can do the same work:

• Cross-collateral structures put an existing property alongside the purchase as additional security, reducing or removing the cash deposit. Effective, but it ties assets together; the trade-offs deserve clear eyes.

• Equity release against an existing property — a commercial property equity loan or a refinance with cash-out — converts built-up equity into the deposit for the next purchase while keeping the two loans separate. If that’s the path, our guide to refinancing a commercial property loan covers when the move stacks up.

• Combinations — part cash, part equity, part vendor or related-party arrangements — are common in practice; the structure question is which combination keeps the overall position clean and serviceable.

Lenders will look through the structure to the substance: total group debt, total security, and whether the combined position services comfortably.

DMF Insight: Equity is the quiet engine of most commercial property portfolios — each property’s growth funds the next deposit. The discipline is making sure every release still leaves each asset, and the group, inside comfortable cover.

How Lenders Size the Whole Package

Deposit and LVR are outputs of the lender’s broader assessment, the same fundamentals that run through all commercial property finance: the strength and consistency of the servicing income (business cash flow, rental income, or both); the borrower’s conduct and credit history; the property’s type, location and lettability; and the purpose and exit logic of the loan. Documentation level matters too — full-doc scenarios generally unlock the strongest LVRs, while low-doc paths trade a lower LVR for lighter verification.

Borrowing capacity — “how much can I borrow for a commercial property?” — is simply this machine run in reverse: income and security in, loan size out. It’s why two buyers with the same deposit can have very different budgets.

If you’re funding a build rather than a purchase, the deposit question changes shape entirely. Development facilities are assessed on total development cost and end value rather than on a purchase price, they draw down in stages against verified progress, and the equity contribution is usually required up front before the lender advances anything — see presales and LVR requirements in development finance and our overview of construction and development finance.

Final Thoughts

There is no universal commercial property deposit. There is an LVR your scenario can support — set by the security type, the loan purpose, the quality of the servicing income and the lender’s appetite — and the deposit is what remains, plus costs. Strong scenarios widen the options: better security, cleaner income and sensible structure all shrink the cash the deal actually requires, and existing equity can often carry more of the load than owners expect.

The practical order of operations is worth stating plainly: establish the likely LVR band for the property type you’re targeting, add the transaction costs, decide whether cash or equity is funding the gap, and only then set your purchase budget. Doing it in that order means the valuation and the costs can’t ambush you. Our commercial property finance pillar covers how the rest of the assessment — servicing, doc type, lease and lender fit — sits around this one.

You may also want to read:

• Refinancing a Commercial Property Loan: When It Actually Makes Sense

• 5 Key Factors Lenders Look For in Commercial Property Loan Applications

• Key Differences Between Residential and Commercial Property Loans

This information is general in nature and does not constitute financial advice. LVR and deposit outcomes are indicative market observations only, vary by lender and scenario, and do not represent an offer of finance. Lending is subject to individual circumstances and lender criteria.

Need Help Structuring a Purchase or Equity Release?

DeMarque Finance can assess the scenario, test lender appetite and structure the deposit — cash, equity or both — before the deal reaches a lender.

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