Purchase price is not always the value
For a purchase, the lender commonly considers the lower or otherwise policy-accepted figure from the contract and valuation. A shortfall increases the effective LVR.
EQUITY AND CASH EXPLAINER
Commercial Property Deposit and LVR
Your deposit is only one part of the cash you may need. Commercial lenders also look at the value they can rely on, the property type, the lease or business, the location and what the loan is being used for.
Plain-English borrower guideNo credit enquiryGeneral guidance onlyReviewed August 2026
THE CORE IDEA
LVR is the loan compared with the value the lender accepts
A 65% LVR means the loan is 65% of the accepted property value. The remaining 35% is equity—but transaction costs and cash buffers sit outside that simple ratio.
Deposit is not cash to complete
The buyer may also need duty, GST funding, legal and valuation costs, due diligence, lender fees, fit-out and post-settlement working capital.
Maximum LVR is not one market number
Property type, location, lease, occupancy, borrower strength, documentation, loan size, purpose and lender appetite can all change the ceiling.
More equity does not replace repayment capacity
A lower LVR can strengthen the deal, but the lender still needs a credible repayment source and suitable documents.
WHAT CHANGES LEVERAGE
Why one commercial property may need more equity than another
The lender is thinking about both the chance of default and what the property could realise if the loan had to be repaid from a sale.
| Factor | May support stronger leverage | May lead to a more conservative position |
|---|---|---|
| Property and market | Standard asset, active buyer market, broad alternative use | Highly specialised fit-out, thin market, restricted alternative use |
| Location | Established commercial precinct with good demand | Remote, single-industry or limited resale market |
| Lease | Strong arm’s-length tenant, sustainable rent, useful remaining term | Vacant, short lease, related party, incentives or concentration risk |
| Condition and compliance | Good condition, appropriate approvals, manageable capital works | Deferred maintenance, cladding/environmental concerns, unapproved use |
| Transaction | Straight purchase or refinance with clear purpose | Cash-out, development, incomplete works, rapid settlement or complex structure |
| Borrower and cash flow | Experienced borrower, clear repayment source and liquidity | Weak evidence, thin buffer, recent losses or heavy other debt |
TRY THE NUMBERS
See the effect of a valuation shortfall
The same loan can produce a different LVR when the lender value moves.
LVR and cash contribution check
See how the same loan changes when the lender valuation is below the purchase price. Add transaction costs separately because they are not automatically part of the property value.
LVR at entered value—Loan divided by the purchase price or current value entered.
LVR after valuation shortfall—Shows why a lower lender valuation can change the transaction.
Estimated cash needed—Purchase price plus entered costs less the loan. GST timing and working capital may add more.
The lender-accepted value, eligible costs and maximum LVR are lender- and transaction-specific.
CASH TO COMPLETE
Build the budget from the bottom up
Do not assume the lender funds every cost. Confirm what is included in the facility and when each amount is payable.
Equity contribution
Purchase price or accepted value less the loan, adjusted for any valuation shortfall.
Government and tax amounts
State duty, registration and any GST cash-flow requirement or property-tax issue.
Finance and professional costs
Valuation, lender, legal, conveyancing, due diligence, quantity surveyor, environmental or building reports.
Property and business needs
Repairs, fit-out, stock, working capital, vacancy, rent-free periods and a post-settlement buffer.
PURPOSE MATTERS
Purchase, refinance and equity release are not treated the same
A lender can be comfortable refinancing existing debt but less comfortable advancing extra cash without a clear, verifiable and acceptable purpose.
Purchase
The lender can assess the contract, property, deposit source, costs and intended use as one transaction.
Straight refinance
The new loan mainly repays the existing facility. The new lender still reassesses value, cash flow, documents and structure.
Cash-out or equity release
Expect questions about amount, purpose, evidence, destination of funds and the borrower’s ability to service the higher debt.
Construction or major works
Funding can be tied to plans, approvals, valuations, progress payments, cost-to-complete and contingency.
PROPERTY AND INDUSTRY CONTEXT
Specialised property can create a wider gap between cost and lender value
A purpose-built facility may be valuable to the current operator but expensive to convert or sell to another user. That can affect value and LVR.
Standard industrial, office and retail
Market depth, location, access, building condition, lease quality and alternative use normally matter. A conventional property can still be difficult if it is vacant, poorly located or highly altered.
Medical, childcare and pharmacy
Fit-out, licences or approvals, operator capability, local demand and the cost of changing the property to another use can affect both cash flow and value.
Hotels, pubs, caravan parks and aged care
The property and operating business may be closely connected. Management, occupancy, seasonality, licences, staffing and capital works can become central to the credit decision.
SDA and other specialised accommodation
Design certification, enrolment or registration, provider arrangements, participant demand, vacancy and alternative-use value need to be separated rather than treated as one guaranteed income stream.
Self-storage, land-lease and emerging assets
Stabilised occupancy, ramp-up assumptions, pricing, operating costs, development stages, presales and management systems can matter more than a single headline rent or forecast.
Service stations and environmentally sensitive sites
Lease quality, site history, contamination risk, environmental reports, remediation exposure and future marketability can affect valuation, leverage and lender appetite.
BEFORE YOU SIGN
Documents and questions that reduce surprises
A finance pre-check is strongest when the property and cash budget are both clear.
- Confirm the likely security classification and whether the property is considered specialised.
- Provide the contract, title details, leases, rent schedule and property outgoings.
- Identify related-party leases, vacant areas, incentives, options, break clauses and upcoming expiries.
- Budget for a valuation below the contract price rather than assuming the contract sets the lender value.
- Ask whether GST, duty, legal costs, fit-out or working capital can be funded and on what basis.
- Show the source of the contribution and leave enough liquidity after settlement.
- Ask how the requested purpose and any equity release affect the maximum LVR.
COMMON QUESTIONS
Commercial deposit and LVR questions
Use these answers as a planning framework, not a lender quote.
How much deposit do I need for a commercial property?
There is no single percentage. Work backwards from the lender-accepted LVR, then add costs, possible valuation shortfall and a post-settlement cash buffer.
Is commercial LVR based on purchase price or valuation?
The lender will apply its policy to the contract and valuation. A valuation below the contract price normally increases the cash you need.
Can the loan include stamp duty and costs?
Sometimes some costs may be funded, but do not assume this. Funding them increases the loan and LVR and must fit lender policy and serviceability.
Do owner-occupied properties get a higher LVR?
Some lender policies differentiate owner-occupied and investment transactions, but the full answer still depends on the property, business, documents and loan purpose.
Why do specialised properties need more equity?
A specialised fit-out, licence, operator dependency or limited alternative use can reduce market depth and realisable security value.
Can another property reduce the deposit?
Additional security can change the overall security position, but it also creates cross-collateralisation and release risks that should be understood before proceeding.
Does a low LVR guarantee approval?
No. Repayment capacity, credit history, property acceptability, legal structure, documents and purpose still matter.
Can I release equity from a commercial property?
Potentially, but the lender will review current value, cash flow, purpose, evidence, total exposure and remaining buffer.
COMMERCIAL FINANCE LEARNING PATH
Move between the question you have now and the next useful check
Each page owns one topic, while the pillar, calculator and guide bring the whole transaction together.
Focused explainers
DSCR explainedHow lenders test whether cash flow can cover the debt.Deposit and LVRHow value, loan size and property risk affect your contribution.Covenants and annual reviewsWhat ongoing loan promises and reviews can mean after settlement.Costs and feesPurchase, finance, due-diligence and ongoing costs to budget for.Valuation processWhat the valuer looks at and why the lender value can differ.Lease-doc vs full-docThe evidence pathways and trade-offs in plain English.Commercial refinanceHow to compare a refinance, release equity and manage maturity.
Core tools and guidance
Commercial Property FinanceSpeak with a commercial finance broker about the complete transaction.Commercial Property CalculatorModel repayments, income support, property-value limits and cash needed.Commercial Property Finance GuideRead the broader end-to-end commercial property finance guide.Commercial Property Market UpdateSee the market and lending context around commercial property.Business Loan Eligibility CheckOrganise a first-pass business funding scenario before a full review.
Official sources and further reading
These sources support the general regulatory, valuation, tax or consumer-protection context. They do not provide lender-specific approval rules. Links checked August 2026.
NEXT STEP
Use the explainer to frame the question, then check the whole transaction.
Rate Challenge can review the borrower, property, lease or business cash flow, valuation, evidence, costs and loan structure together. A specific lender outcome is only available after the full scenario is assessed.
General information only. This page does not provide legal, tax, valuation or financial advice; quote a lender’s current policy; assess eligibility; or promise approval. Lender policy, pricing and documentation can change. Confirm the transaction with the relevant lender, broker, lawyer, accountant, valuer, conveyancer and government authority before acting.