A Complete Guide to Loan-to-Value Ratios (LVRs) for Commercial Office Space in Australia
For Australian businesses and investors, securing finance for commercial office space can be a strategic move to unlock long-term value. However, navigating commercial property finance comes with a different set of expectations compared to residential lending—chief among them is understanding Loan-to-Value Ratios (LVRs).
At Renown Lending, we specialise in helping businesses secure smart, flexible lending solutions for commercial assets. Whether you're purchasing an owner-occupied office, an investment-grade commercial suite, or upgrading your headquarters, understanding how LVRs function in today’s lending landscape is essential.
What Is a Loan-to-Value Ratio (LVR)?
An LVR is the proportion of the loan amount compared to the value of the property being used as security. In commercial lending, LVRs play a pivotal role in assessing loan risk and structuring financing terms.
For example, if a property is worth $1 million and a lender provides a loan of $700,000, the LVR is 70%. The remaining $300,000 would need to be contributed as a deposit or sourced from additional equity.
In the current market, standard commercial office LVRs typically range from 65% to 70%, though this is influenced by several variables including the asset class, borrower profile, loan purpose, and the lender’s risk appetite.
Key Factors Influencing Commercial LVRs
1. The Lending Institution
Lenders, whether traditional banks or non-bank private lenders like Renown Lending, have different criteria when it comes to LVR limits. Major banks tend to be conservative, often capping LVRs at 65%. In contrast, non-bank lenders may offer higher LVRs—especially for clients with strong financial fundamentals or additional security.
2. Type of Commercial Asset
The nature of the asset plays a crucial role. Office spaces in high-demand areas with stable tenancy profiles are viewed more favourably than properties in volatile or niche sectors. As such, LVRs may be higher for prime-grade offices and lower for specialised or vacant commercial premises.
3. Borrower’s Financial Position
A robust financial history, consistent cash flow, healthy balance sheet, and a proven ability to service debt can all influence the LVR a lender is willing to offer. Lenders want assurance that repayments are sustainable, especially in a rising interest rate environment.
4. Owner-Occupied vs. Investment Property
Lenders are generally more flexible when financing properties used by the borrower’s own business. For owner-occupied properties, LVRs of up to 75% are increasingly common. For investment properties, particularly those with uncertain tenancies or short lease terms, LVRs may be reduced to reflect the additional risk.
Higher LVR Options: Are They Available?
While 65–70% remains standard, several alternative options exist under the right circumstances:
75% LVR: Typically offered for owner-occupied commercial properties with strong financial documentation and long-term business plans.
80% LVR: Available through select lenders for smaller commercial loans (e.g., under $1 million) or Low Doc loans where traditional financial statements may be unavailable.
100% LVR: Rare, but possible when additional property is used as security, or when a guarantor is involved. These scenarios often require bespoke structuring and specialist assessment.
Additional Considerations for Borrowers
Risk-Based Pricing
Commercial loans are priced based on risk. The higher the LVR, the more exposure the lender faces, which often results in a higher interest rate. Factors such as loan term, borrower experience, asset location, and tenant stability will all be considered in rate-setting.
Loan Structure
The choice between fixed and variable interest rates, interest-only periods, and repayment frequency can all influence your overall cost of borrowing. A well-structured facility aligned with your cash flow strategy is essential.
Deposit Expectations
According to Mortgage Choice and other major lenders, borrowers should typically expect to provide a deposit of at least 30%. For some specialised commercial assets, this requirement may increase depending on the perceived risk.
Documentation Requirements
Commercial lending involves comprehensive due diligence. Many lenders require:
A detailed business plan
Full financial statements (or alternative proof of income for Low Doc loans)
Valuations and lease agreements (if tenanted)
Identification of directors and beneficiaries (for corporate borrowers)
According to Maxiron Capital and SF Capital, lenders assess both the asset and the borrower holistically to determine lending viability.
How Renown Lending Adds Value
At Renown Lending, we go beyond standard banking checklists. Our tailored commercial lending services focus on fast approvals, flexible structuring, and dedicated support for business owners and investors.
We offer:
Access to private capital with more flexible LVR policies
Fast-track approvals for urgent acquisitions and settlements
Low Doc and Full Doc loan options tailored to SME needs
Loan terms ranging from 3 months to 5 years
Funding from $50,000 to over $10 million
We understand that no two businesses are the same. Our job is to listen, evaluate, and structure the best lending solution to support your next move.
Final Thoughts
Navigating commercial finance doesn’t need to be complicated. Understanding LVRs is just the first step in unlocking the capital needed to grow your business or expand your investment portfolio.
While banks often restrict commercial lending with rigid LVR thresholds, non-bank lenders like Renown Lending offer the flexibility and speed today’s business owners demand.
If you're considering purchasing or refinancing commercial office space, speak with our team today. We’ll help you assess your position, understand your borrowing power, and explore competitive LVR options that suit your goals.
