Buying a manufacturing facility means securing a commercial property loan designed for industrial real estate, which works differently from standard business equipment lending or residential mortgages.
Secured Business Loans for Commercial Property
A secured loan using the manufacturing facility as collateral typically delivers better rates and longer terms than unsecured options. The property itself secures the debt, which means lenders can offer loan amounts up to 70% of the property value, sometimes reaching 80% with strong financials and a solid business plan. Terms commonly extend between 15 and 30 years, matching the lifespan of commercial property assets.
Consider a manufacturing business looking to purchase a warehouse facility in the Kewdale industrial precinct. The business has been leasing for six years and now wants to own. With $400,000 in working capital and strong cashflow demonstrated over three years of financial statements, the owner secures 70% finance. The lender requires a business credit score above 650, evidence of consistent revenue, and a debt service coverage ratio of at least 1.25. The loan structure includes a progressive drawdown to manage settlement and any immediate fit-out work required before operations begin.
Interest Rate Options and Loan Structure
You can choose between fixed interest rate periods, variable interest rate arrangements, or a split combining both. A fixed rate locks your repayments for one to five years, which helps with cashflow forecasting when you're managing large operational expenses. A variable rate often includes redraw facilities and flexible repayment options, letting you pay down the loan faster during profitable periods without penalty.
Split structures work well for businesses that want rate certainty on a portion of the debt while maintaining flexibility on the rest. In our experience, manufacturers with seasonal demand cycles benefit from having at least part of their loan on variable terms with redraw access, so they can manage cashflow when orders fluctuate.
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What Lenders Assess for Commercial Property Finance
Lenders review your business financial statements from the past two to three years, focusing on net profit, cashflow trends, and existing debt commitments. They calculate your debt service coverage ratio by dividing your net operating income by total debt obligations. A ratio below 1.2 usually means the application needs strengthening, either through a larger deposit or demonstrating improved revenue.
Your business credit score matters, but it's not the only factor. A score in the mid-600s can still secure approval if your financials are solid and the property valuation supports the loan amount. Lenders also want a detailed business plan showing how the facility supports expansion or cost savings compared to leasing. If you're relocating from a smaller space, outline the capacity increase and how that translates to revenue growth.
Loan Amount and Deposit Requirements
Most commercial lenders finance between 60% and 70% of the property's valuation, which means you'll need a deposit of 30% to 40% plus settlement costs. Some lenders stretch to 80% loan-to-value ratio for established businesses with exceptional financials, but that usually requires a proven track record of profitability and low existing debt.
Settlement costs for commercial property typically run higher than residential transactions. Budget for legal fees, building and pest inspections, strata reports if applicable, valuation fees, and potential environmental assessments depending on the facility's history. These costs can add another 2% to 3% of the purchase price.
Flexible Loan Terms for Business Growth
Flexible loan terms might include interest-only periods during the first one to three years, giving you breathing room while the business adjusts to ownership costs. Some lenders offer seasonal repayment variations if your manufacturing business has predictable peak and low periods. A business line of credit or business overdraft can sit alongside your property loan to manage working capital without touching your property equity.
If you're purchasing a facility that needs modifications before production starts, ask about progressive drawdown arrangements. The lender releases funds in stages as work completes, so you're only paying interest on the amount actually drawn down rather than the full loan from day one.
How Applecross Businesses Access Commercial Lending
Applecross business owners often look at industrial properties in nearby precincts like O'Connor, Bibra Lake, or Canning Vale, where manufacturing and logistics facilities cluster. The Perth southern corridor offers good transport links and established industrial infrastructure, which lenders view favourably when assessing location risk.
Working with a broker who understands commercial lending means you access business loan options from banks and lenders across Australia, not just the major banks. Some lenders specialise in manufacturing and industrial property, offering better terms for specific facility types. Others focus on fast business loans with express approval timelines if you need to move quickly on a property opportunity.
Cashflow Solutions During Settlement
If you need working capital to manage the transition from leasing to ownership, a separate working capital finance facility can cover operational expenses during settlement and fit-out periods. This keeps your manufacturing operations running smoothly without dipping into the deposit funds or disrupting supplier payments.
Some business owners use invoice financing or a revolving line of credit to manage cashflow in the months leading up to settlement, especially if they're holding back cash for the deposit. These short-term cashflow solutions keep the business liquid without delaying the property purchase.
Preparing Your Application
Gather your business financial statements, tax returns, and a current cashflow forecast covering at least 12 months forward. Lenders want to see that the business generates sufficient income to service the new loan while maintaining operations. If you're planning significant business expansion once you own the facility, include projected revenue increases with supporting detail about new equipment, additional staff, or expanded production capacity.
Your business plan should explain why purchasing makes sense now, how the facility supports your growth strategy, and what competitive advantage ownership delivers. If the purchase lets you expand operations, reduce rent expenses, or improve logistics efficiency, quantify those benefits in dollar terms.
Moving Forward with Your Purchase
Once you've identified a suitable facility and confirmed your finance capacity, move quickly. Commercial property can attract multiple interested buyers, particularly well-located industrial facilities in established precincts. Having pre-approval in place means you can make an offer with confidence and negotiate settlement terms that suit your operational timeline.
Call one of our team or book an appointment at a time that works for you to discuss your manufacturing facility purchase and explore which business loan structure fits your situation.
Frequently Asked Questions
What deposit do I need to buy a manufacturing facility?
Most commercial lenders require a deposit of 30% to 40% of the property's valuation, plus an additional 2% to 3% for settlement costs. Some lenders offer up to 80% finance for businesses with exceptional financial performance and low existing debt.
How do lenders assess my business for commercial property finance?
Lenders review your business financial statements from the past two to three years, calculate your debt service coverage ratio, and assess your business credit score. A debt service coverage ratio of at least 1.25 and a credit score above 650 typically strengthen your application.
Should I choose a fixed or variable interest rate for my facility loan?
Fixed rates provide repayment certainty for one to five years, which helps with cashflow forecasting. Variable rates often include redraw facilities and flexible repayment options, letting you pay down the loan faster during profitable periods without penalty.
What is a progressive drawdown and when is it useful?
A progressive drawdown releases loan funds in stages as work completes, typically used when a facility needs modifications before production starts. You only pay interest on the amount actually drawn down rather than the full loan amount from day one.
How long does commercial property finance approval take?
Approval timelines vary by lender and application complexity, but expect two to four weeks for standard applications with complete documentation. Some lenders offer express approval for established businesses with strong financials and straightforward property purchases.
