Building commercial isn't a bigger home loan. It's funded on the feasibility.
Whether you're building your own premises or developing to sell or lease, a commercial construction loan is assessed on the numbers of the project, not just your income: total development cost going in, end value coming out, and the margin in between. Gearing is lower, progress payments are signed off by a quantity surveyor, and pre-sales or a pre-lease can move the deal. Here's how lenders actually read a commercial build.
Total development cost in, gross realisation value out.
A commercial build is a set of numbers before it's a set of plans. Lenders line up what the project costs to deliver (TDC) against what it's worth when finished and sold or leased (GRV) — and size the loan against both. The illustrative stack below shows where the money in a stylised feasible development goes, and how it's funded.
Illustrative / typical figures only — not a quote, valuation or projected return; a real feasibility varies materially by project, site, sector and lender. Cost slices shown as a share of GRV; the developer margin (~17% of GRV ≈ ~20% profit-on-cost) is the buffer lenders test, and contingency (~4% of GRV ≈ ~5% of construction cost) is a common allowance. Senior debt is capped by BOTH a share of TDC (loan-to-cost, ~65–75%) and a share of GRV (~65% at banks, ~70% non-bank, net of GST), whichever is lower — developer equity funds the balance.
Three numbers that decide a commercial build.
TDC vs GRV — sized against both
Total development cost is everything to deliver the project; gross realisation value is what it's worth finished. The loan is capped against each — indicatively ~65–75% of TDC (loan-to-cost) and ~65–70% of GRV — and the lower figure binds.
Developer margin — the buffer
Lenders want to see a net development margin (profit on cost) of roughly 18–25%. Thin feasibilities under about 15% are usually declined, because there's no cushion if costs run or the market softens.
Pre-sales / pre-lease — the exit
De-risking the exit unlocks cheaper senior debt: banks often want ~50–70% pre-sales (a signed pre-lease for standalone commercial), while non-bank and private lenders may fund with light or nil pre-sales where the sponsor and project stack up.
Commercial construction vs a home construction loan.
If you've built a home before, the mechanics look familiar — but the assessment underneath is a different animal.
| Aspect | Commercial construction / development | Home construction loan |
|---|---|---|
| Assessed on | Project feasibility — TDC, GRV, margin, lease/pre-sales | Your personal income + fixed-price contract |
| Gearing | ~65–75% of cost / ~65–70% of end value | Up to ~80–95% of on-completion value |
| Equity required | ~20–35% of TDC | ~5–20% deposit |
| Serviced by | Sales / lease income + sponsor covenant | Your PAYG or self-employed income |
| Progress payments | Released on quantity-surveyor cost-to-complete sign-off | Released on stage completion + valuation |
| Indicative pricing | Bank Bill (BBSY) + ~3–5% (bank); ~9–13% p.a. non-bank/private | Standard home-loan rate |
| Regulation | Business-purpose — largely outside the National Credit Code | Consumer credit protected |
Indicative figures compiled from Australian development-finance broker/lender guides (Feasly, Innovate Funding, STAC Capital), July 2026 — commercially-influenced secondary sources, not a regulator series, and set deal-by-deal. Rates are indicative ranges only, move with the cash rate, and any comparison rate is illustrative and depends on the amount, term, fees and security of a specific facility. Not an offer of credit.
Commercial build activity is running hot.
While residential eased, the value of approved non-residential building jumped — the construction pipeline businesses actually build in.
Sources: ABS Building Approvals, Australia, May 2026 (seasonally adjusted, subject to revision); RBA Cash Rate Target (as at July 2026). For context, the RBA's small-business variable rate secured by residential property was ~7.39% in May 2026 (Table F7) — a residentially-secured proxy, not a commercial-construction series.
Drawn against work verified, not just work claimed.
On a commercial build the lender doesn't take the builder's word for it — a quantity surveyor checks each claim before funds move.
Equity in first
Most lenders require your equity contribution to be spent before senior debt draws — so you carry the early risk and the lender funds against a de-risked balance.
Progress claim lodged
The builder submits a claim for a completed portion of works under the building contract, with supporting invoices and certificates.
QS cost-to-complete sign-off
A registered quantity surveyor verifies the work done and confirms the remaining budget still completes the project — the discipline that keeps a build funded to the finish.
Drawdown & interest cover
Funds release within the approved facility limit; interest is typically capitalised into the loan during the build, tested against an interest-cover floor (indicatively ~1.10–1.25×) on the income carrying through.
Lower gearing and QS-signed draws aren't red tape. They're the safeguard.
Construction is the hardest sector in the economy — it accounted for around 27% of all company insolvencies in Australia (about 2,975 businesses) in a single recent year, and has stayed the leading sector since. When a builder or a feasibility fails mid-project, it's brutal. The way commercial construction finance is built is the defence against it.
Funding a share of cost and a share of end value, requiring real developer equity, releasing money only against verified cost-to-complete, and testing the margin for a buffer — each of these is there so the project can absorb a shock and still finish. We help you structure it so those protections work in your favour, not against your cashflow.
Source: ASIC insolvency statistics, FY2023–24 (construction was the single largest industry for external administrations). Choosing a financially sound, licensed builder and appropriate insurances remains essential — seek your own professional advice.
What the assessment would surface.
- Gross realisation value (GRV) $6,000,000
- Total development cost (TDC) ~$4,980,000
- Senior debt (~70% of TDC) ~$3,486,000
- Developer equity (~30%) ~$1,494,000
- Net development margin ~$1,020,000 (~20%)
- Bank vs non-bank vs private senior compared
- TDC and GRV caps — lower binds tested
- Pre-sales / pre-lease cover structured
- QS draw schedule & interest cover mapped
- Take-out to an investment / owner-occ facility planned
Illustrative example only — not an offer of credit, a quote, a valuation, a projected return or a guarantee of approval or a particular rate. Actual figures depend on the project, feasibility, lender and borrower, and are confirmed in writing.
Once it's built — the take-out facility
A construction facility is short-term by design. At completion you either sell down the stock, or roll into a longer commercial property loan on the finished asset — generally ~65–75% LVR, no LMI, a 1–5 year term over a 15–25 year amortisation with review events, and GST usually applying on a purchase. If you're holding your own premises, see our commercial property loans page; for the trading side, business finance.
Commercial construction finance, answered straight.
How is a commercial construction loan different from a home construction loan?
It's assessed on the project, not just you. A home construction loan leans on your personal income and a fixed-price contract; a commercial build is sized on feasibility — total development cost going in, gross realisation value coming out, the developer margin in between, and the lease or pre-sales behind the exit. Gearing is lower, the facility is shorter, progress payments are signed off by a quantity surveyor, and because it's business-purpose it usually sits outside the National Credit Code.
How much equity do I need for a commercial development?
Typically around 20–35% of total development cost. Senior debt is capped by the lower of a share of cost (loan-to-cost, indicatively ~65–75% of TDC) and a share of end value (~65% of GRV at banks, ~70% non-bank, net of GST), and your equity funds the balance. Lenders also usually want your equity spent into the project before senior debt draws. These are indicative ranges, not a commitment.
What are TDC and GRV, and why do both matter?
TDC (total development cost) is everything it takes to deliver the project — land, construction, contingency, finance and professional costs. GRV (gross realisation value) is what the finished project is worth sold or leased. Lenders size the loan against both caps and take the lower, and they test the gap between them — the developer margin — as the buffer that absorbs cost overruns or a softer market.
Do I need pre-sales or a pre-lease?
Often, yes, to unlock the cheapest senior debt. Banks commonly want around 50–70% pre-sales cover on a residential development, and a signed pre-lease or pre-commitment before funding a standalone commercial build. Non-bank and private senior lenders may fund with light or nil pre-sales where the sponsor and feasibility are strong — usually at a higher indicative rate. We match the pre-sales position to the right lender.
How are progress payments released on a commercial build?
Against verified work, not just a claim. The builder lodges a progress claim, a registered quantity surveyor confirms the work done and that the remaining budget still completes the project (cost-to-complete), and only then do funds draw within the approved limit. Interest is typically capitalised into the facility during construction rather than paid monthly.
What do commercial construction rates cost, and are they fixed?
Pricing is set deal-by-deal on the project, the security and the sponsor. As an indicative guide, bank senior debt is often priced at the Bank Bill rate (BBSY) plus roughly a 3–5% margin, while non-bank and private senior sits around 9–13% p.a., plus establishment and line fees. Rates are indicative only and move with the RBA cash rate (held at 4.35% in July 2026); any comparison rate is illustrative and depends on the specific amount, term, fees and security. Not an offer of credit.
Planning a commercial build? Let's pressure-test the feasibility first.
Tell us about the site, the build and the exit — we'll map TDC against GRV, compare bank, non-bank and private senior lenders, and structure the drawdowns before you commit. No credit check to start.
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