Funding the deposit on your own commercial premises

Buying your own premises is a milestone. No more rent reviews, no landlord deciding your future, and the rent you used to pay starts building equity instead. The hurdle is usually the deposit: commercial lenders typically want more upfront than home lenders, and stamp duty sits on top. Many owners bridge that gap with equity in property they already own.

How do business owners usually fund the deposit?

Source	How it works	Watch out for
Equity in your home	Top up the home loan or add a second mortgage	Your home is now backing the business premises
Equity in an investment property	Same idea, using a property you don’t live in	Rental income still needs to cover its own loan
Business savings	Retained profits held for the purchase	Don’t leave the business without a buffer
A partner or investor	Shared ownership of the property	Clear agreements from day one
Vendor terms	Seller accepts part of the price later	Less common in commercial property

A property-backed business loan from $20,000 to $5,000,000 can cover the deposit and upfront costs. The commercial property loan itself, for the rest of the price, is usually a separate facility with a commercial lender.

What does the full upfront cost look like?

The deposit is only one part. Budget for:

1. The deposit your commercial lender requires.
2. Stamp duty, set by your state or territory revenue office.
3. Legal and conveyancing fees.
4. Building, pest and any environmental inspections.
5. Valuation and loan establishment costs.
6. GST treatment. Some commercial purchases involve GST; your accountant should check.
7. Any fit-out or repairs before you can move in; see fit-out finance.

Can the business afford to own?

Owning swaps rent for loan repayments, rates, insurance, maintenance and the cost of the money tied up in the deposit. A simple test:

• Add the commercial loan repayment, the repayment on the equity loan used for the deposit, rates, insurance and a maintenance allowance.
• Compare that total with the rent you pay now.
• Check the business can carry it in a slow year, not just a good one.

If ownership costs a lot more than rent each month, the long-term equity gain needs to be worth the short-term squeeze.

Illustrative example. A Mackay engineering workshop pays about $6,500 a month rent on a shed it has occupied for nine years. The owner offers to sell for $1.15 million. The commercial lender requires a substantial deposit, and stamp duty and costs add a significant sum on top. The workshop’s owners use a second mortgage over their home to fund the deposit and costs, and the commercial loan covers the rest. Their accountant models the combined repayments at a little above current rent, which they’re comfortable with given the security of owning the site their heavy equipment is bolted into.

Who should own the premises?

Many business owners hold premises in a separate entity, often a family trust or a self-managed super fund, which then leases the property to the operating business. This can separate the property from business risk and has tax implications either way. Get advice from your accountant and lawyer before you sign, because changing the owner later can trigger stamp duty again.

What are the risks?

• Two properties exposed. If the business struggles, both the premises and the property backing the deposit are at risk.
• Concentration. Your business, your premises and possibly your home all depend on one income.
• Less flexibility. Moving or downsizing is harder when you own.

None of these are reasons not to buy. They’re reasons to buy with headroom.

Should you buy the premises or invest in the business instead?

It’s worth pausing on the opportunity cost. The deposit and costs for premises can be a very large sum. Ask what that money, or that borrowing capacity, would do if it went into the business instead:

• New equipment that lifts output.
• A second location or a new product line.
• Stock to support faster growth.
• A buffer that lets you ride out a slow year without stress.

For some businesses, owning the premises is the best investment available, particularly when the site is specialised, hard to replace or under threat from a landlord who wants to redevelop. For others, the business itself earns a higher return than property ever would, and renting keeps that capital working where it earns most.

Your accountant can help you compare the two paths over five or ten years. A good comparison includes the equity you’d build, the return the business earns on new investment, tax effects and how each option affects your ability to borrow later.

Ready to stop paying rent?

If owning your premises makes sense for your business, let’s work out how to fund the deposit. Asking us doesn’t involve a credit check; that only happens once you choose to go ahead. We don’t fire your enquiry off to a list of lenders. A real person looks at your equity, the property and the business, and calls you with options.

Please be accurate about the purchase price, the property you’d borrow against and what’s owing on it. That way the first structure we suggest can actually work. Start your premises deposit enquiry.