What is Commercial Property Finance?

What is Commercial Property Finance Intellichoice Finance

Commercial property finance can be defined as a loan type used for acquisition or development of commercial property. This includes a factory, a warehouse, an industrial land, an office block, a shop or a store. A commercial property loan can be used to buy a newly developed commercial property or an existing commercial property. The loan can also be used for any future developments and renovations. These forms of loans are generally used and provided to businesses and not offered to individual borrowers.

Who can take out Commercial Property Finance?

  • SMME’s (Small Medium and Micro Enterprise) that will run within the property concerned
  • Property holding bodies that have signed the same shareholding as the running business;
  • Developers of rental spaces to SMMEs, or of infrastructure that will be available for franchise business
  • Businesses purchasing properties as an investment property

How Can Commercial Property Finance Be Used?


A commercial property loan makes use of the commercial property concerned as security for the loan. It can be anything commercially inclined other than a residential property.

Any building structure or parcel of land utilized for business is recognized as commercial property. Generally, there are three types. These properties are acceptable as security for commercial property loans.

  • Retail. Shopping centers, supermarts, high street shops, retail warehouses, car showrooms, bar, pubs, and restaurants.
  • Office. A Property developed mainly for business office use which includes facilities like car parking and various other necessary services.
  • Industrial. Manufacturing units, industrial facilities such as factories, warehouses, and also agricultural properties.


Commercial property loans will need a deposit or a down payment, however, the percentage is determined by the type of loan and property used to secure the loan. For instance, a low doc loan will ask for a higher deposit.

Advantages and disadvantages of Commercial Property Loans

The advantage of a commercial property loan offers low-interest rates compared to other finance types. The Commercial property alone is sufficient security for the loan. The disadvantage is that there are more documents needed and the process is slower compared to other loan types.

Types of Commercial Property Finance

Property Acquisition Finance

This loan type is taken out to purposely finance a purchase of commercial properties. Repayment is often 10 years although it could be tied to the contract period of signed lease. An example is a signed contract for the long-term lease or for student accommodation.

Property Development Finance

This loan type is for the purpose of funding property developments. Such developments could be commercial or residential where the client secures tenants or promotes pre-sales of residential developments. An example of residential developments open for presales such as condominiums. This loan type extends to entrepreneurs and business owners who would like to develop their own property to run their businesses. The repayment generally takes 10 years however it could be tied to the contract period of a signed lease agreement.

Working Capital Finance – Revolving Loan

This loan type is provided to finance property projects that need funds to be used at several periods of the project. This alternative provides the borrower an advantage of convenience since reapplication is not required every time the funds are needed. The highest term for this loan type is 12 Months. However, this can be modified to best suit the cash flows of the business or project being financed.

Working Capital Finance – Term Loan

This loan type is provided to finance expenses necessary to properties like maintenance and repairs or little improvements that take a very short time to complete. The highest term for this loan type is 36 Months. However, this can be modified to best suit the cash flows of the business or project being financed.

Commercial Property Finance – Rates

There are no set rules when it comes to the rating for this type of finance. Loan companies will evaluate each and every application based on their merits. After assessment and evaluation, then the bank will decide on the terms and the rate of finance.

Every single development should be viewed individually; first, determine how you can finance your project property development. Second, is an application for finance to fund property development.

Every property developer has to completely understand, fully plan and mitigate every single aspect of the project. From the planning stage to the financial estimations of the development.