Commercial property lending is assessed across the property, its income or intended use, the borrower’s financial position, available equity and the proposed exit. For a tenanted asset, the tenant and lease are central because they support the property’s income. For an owner-occupied or vacant property, lenders place more weight on the borrower, security, business position and repayment pathway. Investors moving across from residential investment property therefore encounter a different mix of credit tests, rather than commercial lending simply working in the opposite way.
This guide covers the main commercial property funding pathways in New Zealand, the deposit and LVR ranges borrowers may encounter, the practical steps to prepare an application, and how bank and non-bank approaches can differ.
Common Commercial Property Funding Pathways
The most common pathways are:
- Commercial term lending: Longer-term funding for owner-occupied or tenanted property. Term, amortisation and covenant settings are determined by the lender and transaction.
- Development and construction finance: For property being built, converted or substantially refurbished, generally advanced in stages against agreed construction milestones and cost-to-complete controls.
- Short-term and bridging facilities: Usually three to twelve months, with interest serviced, partly serviced or capitalised depending on the structure. These facilities solve a defined timing or transition issue and require a credible exit.
- Commercial and industrial loans from a non-bank lender: Short-term first-mortgage funding where asset type, occupancy, ownership structure, timing or other transaction features sit outside standard bank policy.
Pricing methods vary. A bank facility may be priced from a base rate plus a margin, while short-term non-bank pricing may be fixed or otherwise structured for the agreed term. Total cost also depends on establishment and legal fees, interest treatment, term, valuation or due-diligence costs and extension provisions. A shorter facility can create time to resolve a lease, consent or refinance position, but only where the exit is realistic.
How Much Deposit Do You Need for Commercial Property in NZ?
A 30% to 35% deposit, corresponding to an LVR of about 65% to 70%, is a useful indicative range for many standard commercial properties, but it is not universal. The approved LVR depends on the asset, location, lease or occupancy, borrower, income, condition, seismic and insurance position, and exit. ASAP Finance’s current maximum LVR for commercial and industrial property is 70%, with lower positions possible for specialist or higher-risk assets.
On an illustrative $2.4 million industrial purchase funded at 65% LVR, lending would be about $1.56 million and borrower equity about $840,000, before legal, valuation, due diligence and other transaction costs. GST treatment must be confirmed separately. A land transaction may be compulsorily zero-rated only where the statutory conditions are met, including the parties’ GST status, intended taxable use and the principal-residence exclusion. Obtain tax and legal advice before setting the funding requirement.
A larger equity contribution can improve pricing and leave headroom if value, leasing or costs move. It also ties up capital that might otherwise cover vacancy, fit-out or working capital. Our explanation of loan-to-value ratios covers how lenders apply LVR alongside other credit factors.
How to Finance Commercial Property: The Practical Steps
1. Confirm the Lease Position
For a tenanted property, establish who the tenant is, what covenant or guarantee supports them, the remaining lease term, rent-review mechanics, rights of renewal, outgoings and any incentives or arrears. These factors materially affect value, income certainty and leverage. A vacant property or a lease close to expiry may still be fundable, but usually requires stronger equity, a credible leasing or owner-occupation plan, and an exit that fits the loan term.
2. Test the Income Against the Debt
Lenders commonly test net property income against interest or debt-service requirements using an interest-cover or debt-service metric. The minimum and calculation basis vary by lender and transaction. Confirm whether the lease is net or gross, which outgoings are recoverable, and what vacancy, incentive and interest-rate assumptions have been used.
3. Establish Where the Equity Is Coming From
Identify whether the contribution will come from cash, released equity, vendor finance or another verified source. Lenders need the equity available in the required sequence and will also consider whether the borrower retains enough liquidity for transaction costs, vacancy, fit-out and unexpected expenditure.
4. Assemble the File Before Applying
A commercial funding pack may include the executed lease and rent schedule, tenant and guarantor information, sale and purchase agreement, entity and financial information, valuation or other market evidence, insurance details, and seismic information where relevant. Requirements vary by lender and property. Clear, complete information reduces avoidable conditions and delays.
5. Work Backwards From the Settlement Date
Work backwards from settlement and allow time for credit assessment, due diligence, legal documentation and satisfaction of conditions. Where the underlying transaction is sound but longer-term finance will not be ready in time, bridging finance may carry the purchase, provided the interim facility has a defined and credible repayment pathway.
What Makes a Commercial Deal Harder to Fund
Vacancy or a short lease term: The absence of dependable rental income generally reduces leverage and increases reliance on asset quality, borrower strength and the leasing or refinance plan. A short-term, lower-LVR structure may be possible where the transition and exit are well supported.
Specialist assets: Motels, childcare centres, hospitality assets, vineyards and similar properties may derive part of their value from the operating business, licences or specialised improvements. The buyer pool and lender appetite can be narrower, so stronger equity, additional due diligence and a conservative exit are often required.
A low seismic rating: %NBS is a relative measure of expected life-safety performance, not a prediction of how a building will perform in a particular earthquake. Parliament passed reforms to the earthquake-prone building system in September 2026. Updated seismic-zone changes take effect after Royal assent, while most of the new risk-based system is due to commence on 1 July 2027. The lending assessment should therefore confirm the building’s current EPB-register status and transition treatment, as well as the quality and currency of the engineering assessment, insurance and leasing implications, remediation obligations, timing and cost, and how those matters affect value and exit.
Bank and Non-Bank Lending Criteria Compared
Banks generally offer lower-cost, longer-term funding where the borrower, asset, income and covenant position fit policy. Non-bank lenders generally price higher and lend for shorter terms, but may offer more flexibility around timing, occupancy, security type and transaction structure. Both still assess the borrower, purpose, equity, security and repayment pathway.
Bank and non-bank appetite changes over time and by asset class. Rather than assuming a particular lender will fit, compare the full structure: term, interest and fees, amortisation or capitalisation, covenants, conditions, valuation requirements, extension mechanics and exit. The ASAP Finance lending criteria and commercial property page set out its current parameters.
The best option is the one that fits both the transaction timetable and the long-term repayment strategy; speed should not be assessed separately from cost or exit risk.
Financing Commercial Property with ASAP Finance
Commercial property finance depends on more than the purchase price. Lease or occupancy, borrower position, equity, asset quality, income and exit all influence the structure. Preparing those points before approaching a lender shortens the credit process and exposes gaps early.
ASAP Finance provides short-term first-mortgage lending secured against commercial and industrial property across New Zealand, including leased, vacant and owner-occupied assets subject to assessment. Facilities are generally structured for up to 12 months around a defined exit, with a current maximum commercial and industrial LVR of 70%. If you are weighing up a commercial purchase, refinance or timing gap, get in touch with the team at ASAP Finance to discuss the proposed structure.