Financing a commercial property without traditional serviceability—meaning without demonstrating personal income or standard financials—remains possible through several specialised loan products and alternative lending strategies. Here are the main options available in Australia, including but not limited to lease doc loans:
1. Lease Doc Loans
How it works: The lender assesses loan serviceability based solely on the rental income from the property’s lease, rather than your personal income or financials. If the lease income is sufficient to cover the loan repayments (often with a required buffer), approval is possible without payslips, tax returns, or business financials.
Key features: Typically available up to 70–75% LVR, requires a strong, arm’s-length tenant and a lease with at least 12 months remaining. The lender focuses on the tenant’s strength and the lease terms.
Who offers them: Select banks and non-bank lenders, such as Westpac and Liberty, as well as specialist lenders like La Trobe Financial.
2. No Doc Commercial Loans
How it works: These loans require minimal or no income documentation. The primary assessment is based on the value and saleability of the property itself (asset lend).
Key features: Borrow up to 65–75% of the property value, no income evidence required, suitable for investment properties, and often available even with a complex or non-standard financial situation.
Considerations: Higher interest rates and fees may apply. Minimum loan sizes and deposit requirements often apply (e.g., $500,000 minimum loan, 30–35% deposit).
3. Alternative and Private Lenders
Non-bank, mid-tier, and third-tier lenders: These lenders often have more flexible lending criteria and may consider alternative forms of security, such as business assets or equity in other properties, rather than strict serviceability.
Private lending: Private financiers may provide short-term, interest-capitalised loans (where repayments are added to the loan balance), often used for bridging or development purposes. These loans can be arranged quickly but come with higher rates and lower LVRs.
4. Asset-Backed or Equity Loans
How it works: If you have significant equity in other properties or business assets, some lenders may allow you to use this as security to increase your borrowing capacity, potentially up to 100% LVR when combined with other securities.
Who it suits: Investors with substantial assets but low or irregular income.
5. Mezzanine Finance
How it works: Sits between senior debt and equity, providing additional funds for a purchase or development when traditional serviceability is not met. This is more common in larger or more complex transactions.
6. Development Finance (for property development)
How it works: For projects with a strong end-value or presales, some lenders focus on the projected value and income post-completion, rather than current personal income. Interest may be capitalised during the build period.
Additional Strategies and Considerations
Use of trusts or corporate structures: Some investors use trusts or companies to structure their investments, which can sometimes provide more favorable lending conditions or allow for more flexible assessment.
Combining security: Using a mix of residential and commercial property, business assets, or guarantors to secure the loan and increase the total LVR.
Key Points to Remember
- Lenders will still require a strong lease, quality asset, and often a substantial deposit or equity.
- Interest rates, fees, and maximum LVRs are generally less favourable than for fully documented loans.
- Not all lenders offer these products; specialist brokers can help identify suitable lenders.
| Option | Serviceability Basis | Typical Max LVR | Documentation Needed | Key Considerations |
|---|---|---|---|---|
| Lease Doc Loan | Lease/rental income only | 70–75% | Lease agreement | Strong tenant & lease required |
| No Doc Commercial Loan | Asset value | 65–75% | Minimal (property details) | Higher rates, larger deposits |
| Private/Alt. Lender Loan | Asset/equity, flexible | 60–75% | Varies, often minimal | Higher rates, short terms |
| Asset/Equity Loan | Equity in other assets | Up to 100%* | Asset valuations | May require multiple securities |
| Mezzanine Finance | Projected income/value | Varies | Project details | Used for large/complex deals |
| Development Finance | End-value, presales | Varies | Project feasibility | Interest often capitalised |
*Up to 100% LVR possible only when combining multiple securities or with guarantors.
These options allow investors—including self-employed, retirees, or those with non-traditional income—to access commercial property finance without meeting standard serviceability requirements, provided they have strong assets or lease income to support the loan
CARE – This is a general overview and so full review of your credit history and financials needs to be done.
