Commercial finance
The commercial loan application process, step by step
The commercial loan application process explained: what lenders assess, the documents to prepare, secured vs unsecured options, and the steps to apply.
The commercial loan application process runs from a first conversation about what you want to buy or build, through document gathering and lender assessment, to formal approval and settlement. The timeline and the paperwork depend on your circumstances and each lender’s criteria, so two businesses applying in the same week can have very different experiences. This guide walks through the steps in plain language so you know what to expect and how to prepare.
A commercial loan is finance for a business purpose. That might be buying a commercial property, funding equipment, refinancing existing business debt, or supporting working capital. It sits apart from a standard home loan because lenders look at the business as well as the people behind it. If you are weighing up a property purchase, our commercial lending hub is a good place to start.
What lenders assess before they lend
Before any lender commits, they want to understand whether the loan can be repaid. For consumer lending, the Australian Securities and Investments Commission (ASIC) notes that the interest rate a lender offers depends on factors such as your credit score, income, expenses and savings. Commercial lending follows the same logic, with more weight on the business itself.
In practice, a lender reviewing the commercial loan application process will usually look at:
- Your business income and trading history, often through tax returns and financial statements
- Your ability to service the repayments alongside existing commitments
- The security you can offer
- Your credit history and the credit history of the directors or guarantors
Each lender sets its own criteria, so an application that suits one lender may not suit another. This is where the right preparation, and the right lender match, can make a real difference.
Secured and unsecured commercial finance
A key early decision is whether the loan is secured or unsecured. ASIC MoneySmart explains that with a secured loan you provide an asset, such as a vehicle or property, as security, and if you do not repay on time the lender can repossess and sell that asset. With an unsecured loan you do not provide an asset as security, but the interest rate is usually higher and you may need a guarantor.
| Secured | Unsecured | |
|---|---|---|
| Security | You provide an asset, such as property, as security for the loan. | You do not provide an asset as security. |
| Interest rate | Often lower, because the lender holds security. | Usually higher, because the lender holds no asset. |
| Guarantor | May not be required, depending on the lender's criteria. | You may need a guarantor. |
| If you do not repay | The lender can repossess and sell the asset. | The lender pursues the debt without a specific asset to sell. |
Most commercial property loans are secured against the property being purchased, and sometimes against other assets as well. Offering strong security may help your application, though it depends on your circumstances and the lender’s criteria.
How to apply for a commercial loan: the steps
Here is how to apply for a commercial loan from start to finish. The order can shift between lenders, but the building blocks are consistent.
To see what different repayment structures could look like each month, it helps to run the numbers.
Try the repayments calculator
Open the calculator to run your own numbers.
Fixed or variable, and why rates move
Part of the commercial property loan steps is choosing how interest is charged. A fixed interest rate stays the same for a set period. A variable interest rate can go up or down as the lending market changes, for example when official cash rates change. Neither option is better in the abstract. The right choice depends on your circumstances, your appetite for repayment certainty, and the lender’s criteria.
Your credit position matters
A credit report is a record of your credit history that includes your credit rating, the credit products you hold, and your repayment history. Your credit score is a number based on that report, and a higher score means a lender will consider you less risky, which could mean a better deal. For a commercial application, the credit position of the business and of any directors or guarantors can both be relevant. Checking your report early gives you time to correct any errors before you apply.
Getting the documents and the lender match right
The commercial loan application process tends to move faster when the paperwork is complete and the application is sent to a lender whose criteria suit the request. Choosing the right loan and making sure repayments fit your budget can save you money in interest and fees over the life of the loan, so the comparison work at the start is time well spent. If you would rather not compare lenders yourself, this is a common reason businesses work with a broker who can match the request to a suitable lender.
If circumstances change after settlement and you find repayments difficult, you have options. Financial hardship assistance can be an arrangement with your lender to alter your repayments or set up a payment plan. It is always better to talk to your lender early than to miss a repayment.
Talk to the team at Finance Lab
Every commercial loan is different, and the right structure depends on your circumstances and each lender’s criteria. The team at Finance Lab can walk you through how to apply for a commercial loan, help you prepare your documents, and compare options across a range of lenders. Get in touch to start the conversation.
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