%2029%20(2).jpg)
Commercial loans are a vital tool for businesses and property investors seeking to acquire, refinance, or manage commercial property. For certain borrowers, particularly those with strong tenant lease agreements, a specialised form of financing known as a lease doc commercial loan offers an alternative pathway to approval.
In these cases, lease documentation plays a central role in the lender’s assessment process. Rather than relying on the borrower’s broader financial position, the lender focuses solely on the rental income generated from an existing lease to determine loan serviceability. Understanding how these documents work - and how they influence interest rates, loan terms, and eligibility - is crucial for making informed financing decisions.
Lease documentation refers to the legal agreements that set out the terms under which a tenant occupies a commercial property. In the context of commercial loans, these documents are used as a key form of income verification for the property.
For both lenders and borrowers, clear and comprehensive lease documents are essential because they:
A well-structured lease document reassures lenders that the loan will be supported by consistent rental income.
In a lease doc commercial loan, the property’s lease agreement becomes the foundation of the loan application. This approach is especially valuable for property investors whose personal or business financial records may not fully reflect their ability to service the loan.
Typical elements in lease documentation for these loans include:
Lease doc loans work particularly well when refinancing a property that is already rented out, as the existing lease provides immediate evidence of income. Yard can also arrange lease doc loans for purchases, provided the borrower can show there is an agreed lease in place.
By focusing only on the lease income and property details - without requiring the borrower’s tax returns, profit-and-loss statements, or other personal financial information - lease doc loans can offer a faster, more streamlined approval process.
To explore Yard’s tailored options, visit our lease doc commercial loan page.
Like any loan product, lease doc commercial loan rates vary depending on the lender, property type, lease strength, and broader market conditions. Strong, long-term leases with reputable tenants generally attract more competitive interest rates, as they represent lower risk to the lender.
Key factors affecting rates include:
Some lenders may offer fixed or variable rate options, and these loans can be structured as either principal and interest (P&I) or interest-only (IO) depending on the borrower’s needs. Others may adjust rates based on the perceived reliability of the lease income stream and the borrower’s credit profile. For a comparison of our current rates, see Yard’s rate guide.
Lease finance differs significantly from traditional commercial loans in how serviceability is assessed:
Lease doc loans are particularly useful for investors whose financials are complex or irregular, but whose properties are tenanted under strong leases.
Lease finance plays a significant role for commercial property investors by:
This type of loan can be especially beneficial in competitive property markets, where speed and certainty of funding are critical.
For investors using self-managed super funds (SMSFs) to hold property, strong lease documentation can also enhance borrowing capacity. Learn more in our guide to commercial property in an SMSF portfolio.
While lease doc loans are usually for commercial properties, a lease document generally includes details such as rent amount, payment frequency, lease term, tenant obligations, and any renewal options.
Eligibility often depends on having a valid, enforceable lease with a quality tenant, a suitable property type, and meeting the lender’s loan-to-value ratio (LVR) and security requirements. Lenders will also consider factors such as the interest coverage ratio (ICR) - typically calculated by dividing the property’s net annual rent by its annual interest expense - to ensure the income comfortably covers loan repayments. Most lenders require a remaining lease term of at least 12 months, and they will also review the borrower’s credit history to assess their reliability in meeting obligations.
Lease doc loan rates can be competitive if the lease is strong, but they depend on several factors including the loan-to-value ratio (LVR), whether the loan is structured as principal and interest (P&I) or interest-only (IO), the borrower’s credit history, and the location and type of property. They are typically higher than standard loans where full borrower financials are provided. For up-to-date comparisons, see Yard’s rate guide.
Advantages include faster credit assessment, reduced documentation, and suitability for borrowers with complex finances. Disadvantages may include higher rates than commercial loans where the full borrower financials are reviewed and assessed by the lender.
The process typically involves providing the lease agreement, property valuation, and borrower identification. Lenders then assess the lease income and property security to determine approval.
New loan inquiries: hello@yard.com.au
Service requests: help@yard.com.au
We consider your time, your circumstances and your wallet
%2029%20(2).jpg)
%2029%20(1).jpg)
%2029%20(1).jpg)
