The state of commercial finance

Divergent markets

Commercial vehicle sales have been strong, mainly because there’s finally decent stock around. That’s pushed a lot of buyers toward new over used, especially with the flow of imports from Japan and elsewhere. Another big one is the rise of plug-in hybrids – they’re shaking up the mix and becoming a serious option for businesses and individuals looking at fleet or work vehicles.

It’s very split depending on where you are. In Victoria, civil construction feels like it’s gone into hibernation – things have slowed right down. But in Queensland, it’s the complete opposite.

Civil and commercial construction is firing up, machinery sales are strong, and mining and regain road contracts are feeding back into smaller businesses winning projects and gearing up for long-term work. There’s a clear contrast between the two states, and right now, Queensland is where the demand’s booming.

Finding the right fit

It’s becoming more selective. Banks are cautious about sectors like retail and office, but they’re supportive of stronger areas such as industrial, logistics, and healthcare. Non-banks are filling the gaps, often with more flexible structures, though at higher rates. For clients, the focus has shifted from just “cheap money” to “certainty and the right structure.”

Three main trends [we’re seeing are] strong demand for income-secure assets with reliable tenants; non-banks pushing harder into deals the majors won’t touch – SMSFs, mixed-use, development; and faster credit decisions, with lenders using data and analytics to filter risk more tightly.

Industrial and logistics are leading the pack, driven by e-commerce and supply chain needs. Healthcare and medical centres are another growth area because they’re defensive, long-term plays. And suburban retail with essential services is holding up much better than CBD retail.

Growing choice

We’re seeing a clear split: banks are loosening policy, but remain conservative in construction, while non-banks and private credit funds are stepping in with speed, higher leverage, and flexible structures. Borrowers have more choice, but need guidance to navigate it. Banks are trying to get back into the space, some are more accommodating than others!

Private credit is booming, with family offices and funds driving growth. Demand for short-term, bridging, and bespoke solutions is rising. ESG is moving from “nice to have” to a genuine factor in pricing and appetite especially for Millennials and younger entrants into the commercial market. [And] banks are trying to make a comeback offering lower presales and more lease doc and lighter document options.

Residential and mixed-use development finance, especially in undersupplied housing markets [are seeing demand], but I am personally doing a lot of industrial funding.

Competition and innovation

We are seeing more lenders come to this space. Traditionally, they have been banks, but the rise of non-banks entering the market has increased. Increased competition means more competitive rates and terms to capture market share.

More brokers are entering the commercial space, which has seen an increase in overall commercial loans being written from brokers.

[One of the big] trends at the moment is artificial intelligence (AI). How can we get ahead of the pack with the support of AI?

While I don’t think it will remove the broker, it will assist the broker in quicker decisions and processes. You still need the human touch and check the data is correct even with the help of AI. We have been experimenting with AI, and it’s not always correct, but give it some time.

Bank bounceback

We’re definitely seeing a push towards rebalancing the commercial lending market back towards the banks. The larger non-banks have been so aggressively competitive and captured such a large market share over recent years in the commercial space, and we’re now seeing some trends towards banks loosening credit criteria in certain segments, reinvesting in business banking teams, and being overall more competitive on pricing and accessibility

There is more choice than there has been in a long time. Borrowers now have to navigate between banks, non-banks, private credit, mezzanine, and hybrid lenders – each with different cost/speed/covenant expectations.

Regulatory pressures remain high, particularly for non-banks: we’re seeing increased scrutiny on governance, disclosures, fund liquidity, etc. At the same time, banks are more confident now that interest rates have stabilised (or are expected to decline gradually), and that gives them space to expand again.

Specialised solutions

Major lenders continue to focus on quality clients and strong assets, offering highly competitive pricing to win their business. Fintech and private lenders are expanding their presence in the commercial mortgage market, positioning themselves as solution-based lenders that price according to risk and provide flexibility.

Lease-doc loans are becoming much simpler. In many cases, deals can be assessed purely on an interest coverage ratio of 1.5 times without requiring assessing director’s personal commitment, leading to faster approvals and less documentation.

Some major lenders have introduced rapid commercial refinance products, making credit more accessible for SMEs and helping to ease cash flow pressures.