Private mortgage on commercial property your own business occupies

Owning the building your business trades from is one of the quiet strengths of Australian small business. The dental practice that owns its suite, the mechanic who owns the workshop, the café owner who bought the shop as well as the business: each is sitting on equity that can fund the business inside the walls. A private mortgage is often the fastest way to use it.

This page is about that owner-occupier situation. For leased investment buildings and how different commercial property types are judged, see our pages on commercial property first mortgages and residential vs commercial security.

Can your own premises secure a business loan?

Yes. Offices, shops, medical suites, workshops, factory units and mixed-use buildings can all secure a private mortgage, whether the title sits with you personally, a company or a trust. Lending on commercial security goes up to 70% of value, less what is already owing, and we assess value ourselves, so there’s no formal valuation to arrange.

What makes an owner-occupied building slightly different is that the property and the business are connected. If the business struggles, the building is affected too. A private lender looks at that link openly, then focuses on the exit.

How should the owning and trading entities be connected?

Most owner-occupiers hold the building in one entity and run the business in another. Common arrangements, and how each looks to a lender:

How it’s set up	How it reads	What helps
Property company or trust leases to the trading company at a market rent	Clean: the building has a rent and a tenant	A signed written lease
Same company owns the property and runs the business	Simple, but the building’s value depends on the business	Evidence of comparable rents nearby
Property held personally, business pays rent informally	Workable, but unclear	Putting the lease in writing
Business occupies rent-free	Harder to show what the building would earn	A market rent estimate from a local agent

A written lease isn’t just good paperwork. In NSW, retail leases with a term of more than three years must be registered with NSW Land Registry Services within three months of signing, according to the state’s retail tenancy guide, and the Retail Leases Act generally covers premises under 1,000 square metres. A properly documented lease helps both the loan and any later sale.

GST matters too. The ATO notes that if you’re registered for GST, you charge GST on rent from commercial property, and a leased property can be sold as a going concern. Your accountant should confirm how your arrangement is treated.

What do owner-occupiers use the money for?

The building funds the business in it. The uses we see most:

• a fit-out, refit or expansion into the space next door;
• new equipment, a vehicle fleet or stock for a busy season;
• clearing an ATO debt before it escalates, as covered on our private mortgage to pay an ATO debt page;
• buying out a business partner who also part-owns the building;
• buying a second site while the first one stays put;
• refinancing a bank that won’t renew the facility on the building.

Our fit-outs and new premises page goes into the most common of these. If you already have a figure in mind, the 60-second loan check will tell you whether the building supports it.

Which exits keep you in the building?

Owner-occupiers usually don’t want to sell the premises they trade from, so the exit needs thought. The main options:

1. Bank refinance. The most common. The private loan fixes the issue the bank was worried about, such as an ATO debt or overdue lodgements, then a bank refinances on normal terms.
2. Sale and lease back. You sell the building to an investor and sign a lease to stay. The sale repays the loan and frees up the rest of your equity. A buyer will scrutinise your lease, so negotiate it carefully.
3. Business income or a contract payment. Works for smaller loans with a clear payment on the way.
4. Selling another asset. An investment property, equipment or a share in another business.

Whichever you choose, write it down with dates. A vague “we’ll refinance” is the weakest exit; “the bank has agreed to review once the ATO debt is cleared and the June figures are lodged” is a strong one.

What if a business partner co-owns the building?

Partnerships often own the premises together, and a falling-out or a retirement puts the building and the business in play at the same time. A private mortgage can fund one partner buying the other’s share of both, with the building as security. The steps that matter:

• Agree the price for each part separately. The business and the building are usually different assets in different entities, and each needs its own figure.
• Check who is on the title. Every current owner signs until the transfer settles, including the partner who is leaving.
• Line up the lease. If the remaining owner will hold the building and run the business, put a fresh lease in place between the two entities.
• Think about duty. Transferring an interest in land can attract state duty, which needs to be in the budget.

Our buy out a business partner page works through the funding side in detail.

Illustrative example: a clinic that owns its suite

A Hobart physiotherapy practice owns its strata clinic suite through the principal’s family trust, leased to the practice company under a five-year lease. The suite is worth around $900k with a $300k bank loan. The practice needs $250k to fit out a second clinic in a leased space.

Illustrative only. A second mortgage of $250k is registered behind the bank, which consents. At up to 70% of value, the total debt of $550k sits comfortably within the commercial limit. Interest is capitalised for the first 6 months, so the practice has no loan repayments while the new clinic ramps up. After 12 months, with two clinics trading, the practice refinances both loans with a bank and the second mortgage is discharged. The principal never had to leave the building or offer the family home.

What can reduce what your building supports?

A few things make an owner-occupied building harder to lend against. None is automatically fatal, but each is better raised early:

• A highly specialised fit-out. A building that only suits one type of business has fewer buyers.
• Unpaid strata levies or rates. These rank as costs a buyer would inherit.
• Use outside what the zoning or title allows. In the ACT, for example, land and buildings can only be used for a purpose the Crown lease authorises.
• No written lease and an unusual rent. Hard to show what the building would earn with a different tenant.
• Building defects or compliance notices. Disclose them; they affect the exit.

Own the building you trade from? See if you qualify

The equity in your own premises can fund the next step of the business inside them. Tell us about the building, who owns it, what is owing and how you plan to repay, and a specialist will tell you what it can support.

It takes about a minute, with no credit check at the enquiry stage, so asking doesn’t touch your file. We won’t send your details to a pile of lenders; your enquiry stays with one direct lender. A real person reads it and calls you. Accurate details about the lease and the debt get you an accurate answer.

See what your premises can support →