Bad credit commercial property loans. How defaults, judgments, ATO debt and bankruptcy read when the property is the security, and how to exit.
Property Lending Hub
Bad Credit · Commercial Property · Credit File
A bad credit history does not automatically rule out a commercial property loan. The property carries more of the file than it would on an unsecured business loan, so the credit event, its age and your explanation are read in a different order.
Quick Answer
A bad credit commercial property loan is judged on the property as much as on you, so the type of credit event, how recent it is and whether you can explain and evidence it decide how a lender reads your file. Lenders look at the security first, then the credit file, and a clear exit strategy carries nearly as much weight as the history itself.
Also called: adverse credit commercial loan, impaired credit commercial property loan. The names describe the same kind of file, not a separate product.
Can you get a commercial property loan with bad credit?
Whether a lender will fund the file depends on what the credit event is, when it happened, what has changed since, and what the property is worth as security. Lender policy varies by lender, so be wary of anyone who offers a universal answer.
The lender is not only asking whether you missed payments. It is asking whether the property carries the file, whether you can explain and evidence what went wrong, and whether there is an exit plan if the loan has to be refinanced later. Those tests run in roughly that order, and the first one often decides how far the rest of the file gets.
The files that get a proper hearing tend to share one pattern: the event explained in a short, dated paragraph, the paperwork that closes it off, and a plan for how the debt leaves the balance sheet. Where this commonly lands is a narrower lender pool than a clean file would have, with terms that reflect the added risk, and the detail varies by lender.
If a bank has already declined the file, the read on that decline is covered in the non-bank read on a commercial property loan after a bank decline. This post covers the credit event itself.
Why does property security change the answer?
A commercial property loan is secured by a mortgage over real estate, and that changes the first question a lender asks. The lender's recovery depends on the property, so it reads the valuation and the equity before it reads the history as a number. The same credit event can read differently on a commercial property than on an unsecured business loan for that reason.
The loan-to-value ratio is the main lever. More equity in a sound property gives the file room to move, and a thin margin on a weaker building closes it. The limits each lender applies are its own, so check the detail with a broker rather than relying on a published table.
Your own file still matters. Clean bank statements, a valuation that holds up and a written account of the event are what make the property usable as security. A strong property cannot rescue a file the lender cannot explain, and a clear explanation cannot rescue a property that does not cover the debt.
For the wider picture on how a credit file is assessed, see business credit reports in Australia.
How do lenders read each type of credit event?
A credit event is any record that tells a lender something went wrong. Lenders read each type differently, and the table below maps the questions each one raises. It is a guide to the evidence a lender will look for, not a guide to outcomes, and it sets no approval odds.
| Credit event | What the lender asks | What helps |
|---|---|---|
| Paid default | Why it happened, whether it was an isolated event, and whether the record now shows the payment. | A written, dated explanation, the settlement record, and evidence the account has been current since. |
| Unpaid default | Whether the debt is still owed, whether an arrangement exists, and how the default is being resolved. | A current payout figure or written arrangement, plus a payment history since the default. |
| Court judgment | Whether the judgment is satisfied or still outstanding, and what the plan is to clear it. | Evidence the judgment is satisfied, or a written payment arrangement with a record of meeting it. |
| ATO debt on a payment plan | Whether the plan is current, how much is still due, and whether the business is meeting its other obligations. | Confirmation of the payment plan from the ATO and bank statements showing instalments paid on time. |
| ATO debt disclosed | Whether the debt is still outstanding and whether the business has engaged with the ATO. | Evidence of engagement with the ATO, and proof of payment in full if the debt has been cleared. |
| Discharged bankruptcy | The dates, the cause, what has changed in the business since, and whether any debt remains. | The discharge documents, a written explanation of the cause, and evidence of the current business. |
Sources: Office of the Australian Information Commissioner, what stays on a credit report, read 3 November 2026; Australian Taxation Office, disclosure of business tax debts, last last updated 15 October 2025, read 3 November 2026.
For consumer credit, the reporting rules set how long a listing stays on a credit file. A default and a court judgment each stay for 5 years, a serious credit infringement for 7 years, and bankruptcy for the later of 5 years from the day you became bankrupt or 2 years from the day you were no longer bankrupt. Source: Office of the Australian Information Commissioner, what stays on a credit report, read 3 November 2026.
Paying after a default is listed does not remove the listing. The listing remains and is updated to show the payment. Source: Office of the Australian Information Commissioner, repayment history and defaults, read 3 November 2026.
Credit reporting laws generally apply only to consumer credit information, and the Australian Privacy Principles cover commercial credit information on your report. That means a commercial borrower's record sits under a different set of rules, and it is worth knowing which rules apply before you dispute an entry. Source: Office of the Australian Information Commissioner, commercial credit information, read 3 November 2026.
Does an ATO debt count as bad credit?
An ATO debt is treated differently from a commercial default because the ATO has its own disclosure rules. The ATO may report a business tax debt to credit reporting bureaus if the business has an ABN and is not an excluded entity, has at least $100,000 overdue by more than 90 days, is not engaging with the ATO, and has no active Tax Ombudsman complaint about the intent to report. Source: Australian Taxation Office, disclosure of business tax debts, last updated 15 October 2025, read 3 November 2026.
A notice gives 28 days to act. The entry is removed when the debt is paid in full or the business effectively engages with the ATO. A debt on a payment plan that is being met reads differently from one that is not, and that difference is what the lender will ask about first.
For how this sits on a credit file once it is disclosed, read how ATO debt disclosure reaches lenders.
The ATO debt that causes the most trouble is usually the one nobody has explained in writing. A payment plan confirmed by the ATO, dated, and backed by bank statements does far more work than a verbal promise.
What changes on LVR, term and cost?
A credit event tends to show up in three places in an offer: the maximum loan-to-value ratio, the term the lender is willing to offer, and the price. None of those is a published figure in this post, and each is set by the lender, so the detail varies by lender.
A lower maximum LVR means more of your own equity has to go into the property. A shorter term means the debt falls due sooner, which puts refinancing at the centre of the plan. Pricing reflects the lender's risk view and is set in the offer, not in advance.
A shorter facility is a bridge, not a plan, so the exit belongs in the structure from day one. The types of lender that consider these files, and how each is regulated, are covered in the second tier lenders guide.
How do you exit a bad credit commercial loan?
The exit is the part of the structure a lender will test hardest, because a borrower with an adverse record has to show how the debt leaves the balance sheet. An exit plan answers two questions: how the loan is repaid or refinanced, and when. Put it on paper before you take the loan, not after the date arrives.
- Set the exit date. Work backwards from the date the facility ends, so any refinance starts early enough to matter.
- Settle the credit event. Confirm the default or judgment is resolved, the ATO plan is current, or the bankruptcy papers are in hand.
- Protect the cashflow. A lender will read the business accounts against the repayments, so show a margin rather than break-even.
- Value the property early. A current valuation tells you whether a refinance is open before you need it.
Many lenders want to see a clean conduct period before they will refinance a bad credit file, and that period varies by lender. Ask for the requirement in writing rather than assuming it. Where a default is already on the file, the refinance read is set out in the post-budget refinance guide after a business loan default.
If the business is already struggling to meet repayments, act before the facility is in default rather than after. The refinance guide covers the steps, and this section covers the test a lender applies to the exit.
What protections do you have on a commercial loan?
The protections depend on the type of lender as much as the type of loan. ASIC's guidance says lenders that provide loans to consumers must hold an Australian credit licence and be members of AFCA. Lenders that only provide commercial loans are not required to hold a credit licence or be AFCA members, although some may join voluntarily. Source: ASIC, INFO 207, reissued 19 April 2024, read 3 November 2026.
ASIC's guidance also places commercial loans in the category with the lowest level of protection. That is a reason to read the offer closely and to understand the security before you sign, rather than relying on a general sense of protection.
On privacy, the OAIC says credit reporting laws generally apply only to consumer credit information, and the Australian Privacy Principles cover commercial credit information on your report. Source: Office of the Australian Information Commissioner, commercial credit information, read 3 November 2026.
Those are the rules, not advice on your file. Questions about clearing a debt, or about what a bankruptcy or debt agreement means for you, go to a solicitor, accountant or financial counsellor.
If you are in real difficulty now, talk to the National Debt Helpline first, and read what to do when business loan repayments fall behind.
For most borrowers with a bad credit history, a commercial property loan turns on three things: the property that carries the file, the credit event explained and evidenced, and the exit plan agreed before the loan starts. The credit event is the starting point of the read, not the verdict on the file.
Key takeaway: Build the exit plan before you take the loan, because the exit is the part the lender will test hardest.Frequently Asked Questions
A bad credit commercial loan is a business or commercial property loan offered to a borrower whose credit file shows a credit event such as a default, judgment or insolvency. It is not a separate product: the lender still applies its own policy, but the property usually carries more of the file. Each lender sets its own view of what counts as adverse, so the answer varies by lender. Start with the credit file glossary entry to see what a lender is reading.
Commercial financing with bad credit is possible in some cases, depending on the credit event, the security and the lender's policy. The property carries the file, so sound security and a clear explanation matter as much as the history. Lenders that will consider an adverse file vary by lender, and the exit plan is tested as closely as the entry. The bad credit business loans overview covers the wider options.
Refinancing commercial property with bad credit can be done in some cases, but the lender will test the credit event, the current value and the exit more closely than on a clean file. A credit event that has been paid, explained and evidenced usually reads differently from one still outstanding. The steps and timing of a refinance are set out in the refinancing glossary entry.
Bad credit commercial property loans can come from non-bank lenders and specialist funders, although the pool is narrower than for clean files. Lenders are regulated differently depending on whether they lend to consumers or only to businesses, and that affects the protections you have. The second tier lenders guide explains how the lender types differ.
Buying commercial property after bankruptcy depends on the lender's policy and on the rest of the file, and a discharge does not by itself mean a loan will follow. The timing and cause of the bankruptcy are usually the first questions a lender asks. Speak to a solicitor or accountant about what bankruptcy means for your situation, and read the bankruptcy glossary entry for the terms.
FBAA Accredited
