Commercial construction lending is structured differently to a standard commercial property loan. Rather than settling one lump sum, funds are released in stages against certified progress on site, and interest is charged only on the amount actually drawn at each point, not the full facility.
The right structure depends heavily on what happens after completion: whether the finished asset will be occupied by your own trading business, or held and leased out. That distinction shapes almost everything else about how the loan is assessed.
Planning a commercial build and want to understand how the finance works? Call us on 1300 562 696 or get in touch and we’ll be back to you shortly.
Construction finance follows a staged drawdown structure rather than a single settlement. Here’s the shape of it.
Money is released against work actually completed, not in advance of it. A typical sequence runs from a land advance at settlement, through your equity contribution, progress claims as the build proceeds, and a final claim at practical completion, with each draw checked against progress on site.
You’re charged interest only on the portion of the facility that’s actually been drawn at each stage, not the full approved amount. Lenders generally let you choose between capitalising interest during the build, which adds it to the facility balance, or servicing it monthly in cash, which keeps the finished debt smaller but requires stronger cash flow during construction.
At each draw, the lender checks that the funds still undrawn are enough to finish the project. This is what stops a facility running short if variations, delays or cost overruns eat into the budget, and it’s a step that doesn’t exist on a standard settlement loan.
The single biggest factor is what repays the debt once the building is finished. Here’s what else moves the numbers.
If your own trading business will occupy the finished premises, lenders assess it on that business’s cash flow and its ability to service the debt once construction is complete. This is generally the most straightforward structure to get approved.
Where the finished asset will be leased out, lenders look at tenant commitment, the strength of any pre-lease, projected rental income, and the completed investment value, along with your exit strategy once construction ends.
Lenders typically size the loan against the lower of total project cost or completed valuation, so the LVR percentage alone doesn’t tell you much without knowing which one binds. Specialised assets, such as childcare centres or medical suites, commonly need more equity because they have a narrower resale market.
Lenders also want comfort in who’s building it, under what contract, and on what timeline. A fixed-price contract with a builder the lender recognises makes for a smoother approval than an owner-managed build with variable trade contracts.
Commercial finance isn’t only about the headline rate. It’s about being matched to a lender that will approve you, structuring the facility so it suits the business long term, and having someone manage the process. Here’s what working with us looks like.
We compare commercial facilities across a broad panel of major banks, second-tier lenders, non-bank funders and specialist commercial lenders, so you see a genuine spread of options. We match the deal to the lender most likely to approve it at a competitive rate, which often isn’t your everyday bank.
You deal with experienced brokers who expect to see trusts, companies, partnerships, partner distributions and complex security, and who know how to present your structure to a lender accurately rather than force-fitting it into a generic application.
From the first conversation to settlement, we prepare the submission, liaise with the lender, coordinate with your accountant and solicitor, and keep you updated at each stage, so the deal keeps moving and you’re never chasing it.
For most commercial transactions, Loanworx is paid an upfront and trail commission by the lender after settlement, and that commission typically does not change the rate or fees you pay. For more complex scenarios a fee for service may apply, and we’ll disclose it in writing before any work begins. No surprises.
A standard commercial loan is usually drawn in one settlement against a completed property. A construction loan is released in stages against certified progress on site, with interest charged only on the amount drawn, and a cost-to-complete check at each draw.
No. You’re charged interest only on the portion of the facility that’s actually been drawn at each stage. Whether that interest is capitalised into the facility or paid monthly in cash is a structuring choice that affects your cash flow during the build and your final debt at completion.
Yes. An owner-occupier build is generally assessed on the trading business’s cash flow once construction finishes. A build-to-lease project is assessed on tenant commitment, lease income and the completed investment value, since a trading business’s cash flow isn’t what will repay the debt.
It depends on whether the lender is sizing the loan against total project cost or completed valuation, whichever is lower, and on the asset type. Specialised properties with a narrower resale market, such as childcare centres or medical suites, typically require more equity than a standard warehouse or office build.
Lenders run a cost-to-complete test at every draw, checking that the funds still undrawn are enough to finish the project. If a variation or delay creates a shortfall, further advances can be paused until it’s resolved, which is why realistic budgeting and contingency matter from the outset.
Talk through your project with a specialist commercial broker, with no cost and no obligation. Call us on 1300 562 696 or get in touch and we’ll be back to you shortly, ready to map out what’s possible for your build.
Disclaimer: The information provided here is general in nature and should not be considered financial, tax or legal advice. You should consult your professional advisers, such as your accountant, solicitor and quantity surveyor, to see whether a particular finance strategy is suitable for your project, ahead of a discussion with us that will be limited to how to arrange any funding required.
