If you have bought a house in New Zealand, you know roughly how the process works. You have a deposit, the bank checks your income, and you get a 30 year loan.
Commercial property lending looks similar from the outside and behaves almost nothing like it. Different deposit levels, different loan terms, different assessment logic, and a set of questions about the building and its tenants that never come up in residential lending.
Here is what changes, what lenders assess, and what you can do before you apply to give yourself the best shot at a yes.
How commercial lending differs from residential
Four things are genuinely different, and they catch people out in the same order every time.
The deposit is larger. Where a residential owner-occupier may buy with a 20 percent deposit, commercial lending typically caps out around 65 to 70 percent of the property value with mainstream lenders. Budget on at least 30 to 35 percent in cash or usable equity for a straightforward deal.
The loan term is shorter than the amortisation. Commercial facilities are usually written for three to five years, then reviewed. That does not mean you must repay everything at the end. It means the lender reassesses you, the property and the market before rolling the facility over. Repayments themselves are often calculated over 15 to 20 years rather than 30.
Income, not salary, does the servicing. Lenders test whether the property or the business can carry the debt. For owner-occupiers that means business profitability. For investors it means lease income.
The building matters as much as the borrower. Tenant quality, lease terms, seismic rating, building condition and location all feed directly into the credit decision and the pricing.
The two types of commercial buyer
Almost every commercial property loan falls into one of two camps, and lenders assess them differently.
The owner-occupier
You have been leasing premises, you have outgrown them, or you have simply reached the point where paying rent to someone else no longer makes sense. Buying gives your business a permanent base and builds equity in an asset you control rather than one you rent.
Here the lender is really assessing your business. Trading history, profitability, the strength of your balance sheet and whether your earnings can comfortably carry the loan. The property is the security, but your business is the story.
The investor
You are buying a commercial premise leased to a tenant, usually chasing a higher yield than a term deposit or a residential rental. Here the lease income services the loan, and the lease agreement itself goes under the microscope.
There is also a third category worth mentioning: specialist assets such as motels, hotels, accommodation and bare commercial land. These have their own lending criteria again, and a narrower pool of lenders willing to look at them.
The numbers lenders run
Loan to value ratio
For most mainstream lenders in 2026, commercial LVR generally tops out around 65 percent, sometimes 70 percent depending on the asset and the lender. Non-bank lenders may go further, at a pricing premium.
The quality of the security drives where in that range you land. A modern industrial building on a long lease to a strong tenant sits at the favourable end. Secondary retail in a soft location does not.
Interest cover ratio
This is the ratio lenders reach for first, and it is where many applications quietly fall over. Interest cover measures how comfortably your income covers the interest on the loan.
Most mainstream banks want to see somewhere between 1.5 and 1.75 times cover, meaning at least $1.50 of reliable income for every $1.00 of interest. Critically, they test it at a stressed interest rate rather than the rate you are actually being offered, so build in headroom before you assume a deal works.
Sensitivity to rate movements
Commercial borrowers are more exposed to rate changes than most residential borrowers, because facilities are often floating or fixed for short periods. That is worth thinking about carefully right now. The Reserve Bank lifted the Official Cash Rate to 2.75 percent on 2 September 2026, the second consecutive increase, with inflation running above the target band. Whether or not further movement follows, the practical implication is the same: model your numbers with room to move, and think about how much of the facility you want fixed.
The lease is the asset
For investment purchases, the lease agreement carries as much weight as the building. Lenders will want to understand:
- Who the tenant is. A government department, a national franchise and a two year old start-up carry very different risk.
- How long the lease runs. Term remaining, rights of renewal and whether those rights sit with the tenant or the landlord.
- What the income actually is. Gross versus net, who pays outgoings, rates, insurance and maintenance, and how rent reviews are structured.
- What happens if the tenant leaves. How readily the space could be re-let, and how long you could carry the loan if it sat empty.
Where a property has multiple tenants, lenders will look at the weighted average lease term across the whole building and at how concentrated your income is in any one tenant.
The building itself
This is where commercial due diligence departs furthest from residential, particularly in Wellington.
Seismic rating. New Zealand lenders and insurers pay close attention to a building’s seismic performance, and Wellington sits in a high seismic risk zone. Under the current system, a building assessed below 34 percent of the New Building Standard is legally earthquake-prone, while 67 percent NBS and above is generally treated as acceptable. Many commercial leases, insurance policies and finance agreements use those thresholds as triggers.
The Government has proposed a significant reform that would replace the NBS percentage system with a risk-based framework, but at the time of writing the legislation has not been passed and the existing rules still apply. If you are buying, do not assume future reform will remove a problem you are taking on today.
Practically, a low rating affects you through four channels: the cost of strengthening, whether you can get insurance and at what price, whether a lender will fund it at all, and whether quality tenants will sign a lease.
Valuation. Commercial valuations are usually required from a valuer on the lender’s approved panel. Order it through the right channel or you may end up paying twice.
Other due diligence. Building warrant of fitness, condition and deferred maintenance, contamination history for industrial sites, zoning and resource consent status, and any body corporate obligations if the property is part of a larger complex.
What you will need to provide
Being organised at the front end genuinely changes both the speed and the outcome. Expect to gather:
- Latest year-end financial statements, usually the last two years
- Year to date management accounts
- Debtors and creditors listings
- Confirmation you are current with tax and GST obligations
- Details of the borrowing entity, including trust deeds or company structure
- The sale and purchase agreement
- The lease agreement in full, for investment purchases
- A valuation from a panel valuer
- The seismic assessment and any strengthening documentation
- A clear picture of your existing debt and security position
The presentation of that information matters. A commercial credit team is reading a story about risk. Two identical applications, one assembled thoughtfully and one sent through as a pile of PDFs, do not get the same answer.
Structuring the loan
Approval is not the finish line. How the facility is put together affects your cash flow and your flexibility for years.
Interest-only versus principal and interest. Interest-only is common where cash flow is stable and leverage is moderate. It improves short-term cash flow and leaves the debt where it started, so it needs to be a deliberate choice with an exit in mind.
Splitting the facility. Fixing part and floating part gives you certainty on the bulk of the repayment while keeping room to make lump sum reductions.
The borrowing entity. Company, trust or partnership. This has tax, liability and succession implications well beyond the loan itself, and is worth settling with your accountant and lawyer before you apply rather than after.
Personal guarantees. Most commercial lending involves director or shareholder guarantees. Understand exactly what you are signing and whether the exposure can be capped.
Frequently asked questions
How much deposit do I need for a commercial property in New Zealand?
Typically 30 to 35 percent, since mainstream lenders generally lend up to around 65 percent of the property value. Stronger assets and stronger borrowers can occasionally do better, and some non-bank lenders will go higher at a price.
Can I use equity in my home for a commercial purchase?
Often yes. Using residential security alongside the commercial property can improve the overall structure and pricing, though it does put your home into the transaction. It is a decision worth thinking through carefully.
Are commercial interest rates higher than home loan rates?
Generally yes. Commercial lending is priced for higher risk and lower liquidity, and it is priced deal by deal rather than from a published rate card. LVR, tenant strength, lease term, property type and location all move the number.
What happens at the end of a three year commercial facility?
The lender reviews the loan, the property and your position, then offers to renew, reprice or require a partial repayment. It is not automatic, which is why maintaining your covenants and your relationship with the lender matters.
Can I buy a commercial building through my business or trust?
Yes, and most buyers do. The right entity depends on your tax position, asset protection needs and succession plans, so decide it with your accountant before you sign an agreement.
Talk to someone who does this regularly
Commercial lending is a specialist field. The criteria are different, the documentation is heavier, and the difference between an approval and a decline often comes down to which lender the application went to and how it was presented.
At Lendal Mortgages we work with a range of commercial lending specialists and major banks, and we know what each of them is actually looking for. We will help you understand what the lender needs, get the information together properly, and put your application in front of the right people.
Whether you are moving out of a leased premise, adding an investment property to your portfolio or looking at something more specialised, get in touch for a conversation. You can also read more about our commercial property loan service, or look at development lending and asset finance if your plans go further than a purchase.