Commercial LVR: How Much Can You Borrow Against a Commercial Property?

By Vineet Danwar, Founder, TransformBiz — ex-PwC, Deloitte, Protiviti; 20+ years in corporate finance, banking and business structuring.

You have found a commercial property worth $2 million. The numbers look promising, the location works, and the rental income could support your next move.

There is one problem: how much will a lender actually let you borrow?

The answer starts with your commercial loan-to-value ratio (LVR). Stopping there, though, would be a mistake. A lender might be comfortable with the property's value but far less comfortable with its tenant, lease expiry, rental income, or the way your existing debts are structured. You can hold substantial equity and still find your borrowing capacity falls short of what the transaction needs.

Commercial lending isn't just about what a property is worth. It's about how the asset, the borrower and the proposed debt work together, and that distinction is the starting point for every deal TransformBiz structures.

What Is Commercial LVR?

LVR measures the loan amount against the value of the property used as security:

LVR = Loan Amount ÷ Property Value × 100

Example: you buy a commercial property for $2 million and the lender approves a $1.3 million loan. Your LVR is 65%, and you're contributing the remaining $700,000 before transaction costs.

The lower the LVR, the more equity sits behind the loan, and the bigger the buffer a lender has if the property's value falls.

But LVR is only one part of the credit assessment. The lender still has to decide whether the property is acceptable security and whether the debt can actually be serviced. Two buildings with identical valuations can carry very different risk: an industrial property with a strong tenant and a secure lease is a different proposition from a vacant retail building hunting for its next occupant.

The valuation gives you a starting point. It doesn't tell you the whole story.

How Much Can You Borrow on a Commercial Property?

For initial planning, modelling conventional commercial investment lending at 60-70% LVR is a useful starting point. This is an indicative range, not a universal lending rule. The actual LVR depends on the lender's policy, the property, the borrower and the transaction. Some circumstances support higher leverage; others call for a larger equity contribution.

Here is what different LVR assumptions look like on a $2 million property:

• 50% LVR — $1,000,000 loan, $1,000,000 equity towards purchase
• 60% LVR — $1,200,000 loan, $800,000 equity
• 65% LVR — $1,300,000 loan, $700,000 equity
• 70% LVR — $1,400,000 loan, $600,000 equity
• 75% LVR — $1,500,000 loan, $500,000 equity

These figures illustrate the mathematics. They don't represent available offers or approval thresholds from any particular lender.

At 70% LVR, you'd need $600,000 to cover the purchase price, before stamp duty, legal fees, valuations, lender fees and other transaction costs, which push the real cash requirement higher.

There's also valuation risk to factor in before signing a contract. Suppose the agreed purchase price is $2 million but the lender's valuation comes in at $1.9 million. If the lender caps the advance at 70% of that lower figure, the loan becomes $1.33 million, and you'd need to contribute $670,000 rather than $600,000, before costs. That additional $70,000 isn't a theoretical inconvenience. It can determine whether the transaction proceeds.

The sensible approach: model several LVRs, allow for valuation uncertainty, and work out how much cash you can commit before the acquisition becomes financially uncomfortable. Run your own numbers against our borrowing capacity calculator before you go to market.

What Actually Determines Your Commercial Borrowing Capacity?

LVR tells you how much debt a lender may permit against a property's value. Borrowing capacity determines whether that debt is actually achievable under the lender's assessment. Four factors deserve particular attention.

1. The property's income and tenant quality

For an income-producing investment, the lease is a financial asset in its own right. Lenders examine the rent, tenant covenant, remaining lease term, outgoings, and the likelihood that income continues through the loan period.

Two properties generating similar annual rent can carry very different risk: one with a financially established tenant and several years left on the lease, the other with a tenant approaching expiry and renewal uncertain. The income today may look the same. The risk of interruption tomorrow isn't.

This is why weighted average lease expiry (WALE) matters in multi-tenanted properties: the timing of rental income needs to sit alongside the proposed loan term, not be assessed in isolation.

2. Your ability to service the debt

A property can meet the LVR requirement and still fail the lender's servicing assessment. Lenders weigh rental income, property expenses, existing debt commitments, business income, and the impact of higher interest rates, and the precise approach varies by facility and lending policy.

For a property-dependent commercial loan, Australian prudential standards also require banks to assess the tenancy profile against loan maturity, as set out in APRA's APS 112 standard.

The practical lesson: don't confuse a property's potential loan limit with what your financial position can actually support.

3. The property itself

Commercial property isn't one uniform lending category. Retail, office, industrial, mixed-use and specialised properties each carry different tenant markets, resale prospects and operating risks. Vacant premises and development projects raise additional questions around future income, completion risk and valuation.

Location matters too. If the property needs to be sold under pressure, how deep is the likely buyer pool? These considerations all feed into a lender's appetite, the LVR offered, and the terms attached to the facility.

4. Your wider financial and ownership structure

Existing loans, personal guarantees, company liabilities, available cash and the ownership entity all influence a commercial lending application. For business owners and investors using trusts or companies, the question isn't only which property secures the loan. It's also which entity borrows, which entity receives the income, and where the repayment obligations sit.

This is where finance structuring matters more than a headline rate. The right structure supports the current transaction while preserving flexibility for the next one. Our commercial finance team works through this at the start of every engagement, not after terms are agreed.

How Much Usable Equity Do You Have?

If you already own property, existing equity may help fund your next commercial purchase. But equity on paper and equity available to borrow are two different things.

A useful preliminary calculation:

Potential Usable Equity = (Property Value × Target LVR) – Existing Secured Debt

Example: you own a property valued at $1.5 million with an existing loan balance of $600,000. If a lender is willing to advance up to 70% LVR against that property:

• Estimated property value: $1,500,000
• Illustrative total lending limit (70%): $1,050,000
• Existing secured debt: $600,000
• Potential additional equity release: $450,000

That $450,000 is a theoretical starting point, not a confirmed borrowing limit. Servicing requirements, lender policies, existing facilities and costs may all reduce what you can actually access.

Releasing equity doesn't create additional wealth by itself. It converts part of the equity you hold into debt, so the new acquisition needs to justify the additional borrowing. For investors with multiple properties, it's also worth understanding how each lender treats existing securities and debts: releasing funds from one property, using several properties as security, and refinancing an existing facility can produce materially different outcomes. The objective is to access the funding you need without unnecessarily compromising the rest of your portfolio.

The Detail That Often Gets Overlooked: Loan Structure

Two commercial loans can carry similar interest rates and LVRs while producing very different outcomes for the borrower. A lower-priced facility with a short review period, restrictive interest-cover covenants, or valuation triggers can force a reassessment sooner than expected. Compare that with a facility whose term, repayment arrangements and conditions actually match the asset's income profile and your investment horizon.

The cheaper loan is not automatically the better loan. Commercial facilities need to be assessed as a complete package: interest rate, fees, loan term, review dates, covenants, guarantees, security requirements and refinancing risk.

Cross-collateralisation deserves particular attention for investors building a portfolio. Using multiple properties as security can be appropriate in some circumstances, but it can also make selling, refinancing or releasing individual assets more complicated. There's no single structure that works for everyone — understand the trade-offs before committing to the facility.

How to Strengthen Your Commercial Loan Application

You can't control every aspect of a lender's credit policy, but you can control the quality of the information and strategy behind your application:

• Start with a realistic valuation and a clear view of the property's rental income
• Have the lease, expense details, tenant information and existing loan commitments organised before approaching lenders
• Model repayments under less favourable conditions rather than relying solely on today's rate and rental income
• Understand how much liquidity you'll have left after settlement
• Assess the transaction against your wider financial position, not just the deal in front of you

If the acquisition is part of a larger property strategy, consider how your chosen lender, ownership entity, equity release and security arrangements affect your future borrowing capacity. That's the difference between arranging a loan one transaction at a time and designing a funding structure around a longer-term plan.

Commercial LVR Is the Starting Point, Not the Strategy

The question isn't simply how much a lender will let you borrow. It's how much you can borrow on acceptable terms, how comfortably the debt can be serviced, and what those lending arrangements mean for your next move.

At TransformBiz, the focus is on structuring finance around the transaction and the wider plan, not selecting a loan on LVR or interest rate alone.

If you're considering a commercial acquisition, refinancing an existing facility, or releasing equity for your next investment, start a conversation with TransformBiz to assess the lending structure and the options available to you.

This article provides general information about Australian commercial property finance. It does not consider your objectives, financial situation or needs and is not financial, credit, tax or legal advice. Lending criteria, LVR limits, pricing and approval conditions vary by lender and individual circumstances. All lending is subject to assessment and approval. Obtain appropriate professional advice before acting.

Frequently Asked Questions

Can I borrow 80% LVR on a commercial property? Some specialist lending arrangements may permit higher leverage, but 80% LVR should not be assumed to be available for a standard commercial investment. Eligibility, pricing, security and servicing requirements depend on the particular lender and transaction.

How much deposit do I need for a commercial property? The equity contribution depends on the approved LVR. At 65% LVR, for example, you'd fund 35% of the purchase price, plus transaction costs and any gap between the purchase price and the lender's valuation.

Can I use residential equity to buy commercial property? Potentially. Depending on your circumstances and lender policy, equity in an existing residential property may help fund the deposit or costs for a commercial purchase. The additional borrowing still needs to be assessed, and using your home as security increases your personal financial exposure.

Is a higher LVR always better? No. A higher LVR reduces the initial equity contribution but increases leverage and generally leaves a smaller buffer against falling property values. The right borrowing level reflects the property's income, your capacity to service debt and the risk you are prepared to carry.