SMSF Commercial Property Loan Checklist: Documents Required By Lenders

Purchasing a commercial property using an SMSF is feasible, though the lenders will require more paperwork than a standard loan due to the fact that an SMSF is a trust structure and borrowing has strict regulations. Here’s a more readable and checklist version of what you will typically require (and why). 

Quick checklist (high level)

You will be generally requested to provide documents on three buckets:

• Fund documents (to demonstrate that the SMSF is established properly and has been permitted to borrow).
• Documents of property (to demonstrate the deal and the rental income).
• Personal papers (since lenders generally require member guarantees).

1) SMSF and trust set-up documents.

These demonstrate that the borrowing structure is in compliance and is well documented.

• SMSF Trust Deed (certified copy): Outlines how the fund is managed and whether or not it is allowed to borrow.
• Bare Trust / Custodian Trust Deed: Confirms that the property will be held in the appropriate holding-trust structure until the loan has been repaid.
• Trustee information: Trustee company documentation (in case you have a corporate trustee) or personal trustee identification documentation.

Hint: A lot of delays occur at this point, as documents are either outdated or executed improperly, and thus it is worth looking at them early.

2) Provide financial statements (to demonstrate that the SMSF is capable of servicing the loan)

This is the lender’s health check on your super fund.

• SMSF financial statements (usually 2 years) that are audited.
• SMSF tax returns (usually 2 years).
• SMSF bank statements (usually 6-12 months): Assists the lender in viewing contributions, expenditures and cash buffers.

What the lender is actually seeking: regular payments, reasonable expenditure and money remaining after the deposit.

3) Documents of property and deals (the commercial reality)

Commercial lending is highly numbers-driven. The lender is interested in knowing the asset and the income.

• Contract of Sale: Affirms the price of purchase, buyer information and settlement conditions.
• Lease agreement (in case of tenancy): It is often a significant document since rent is the core of serviceability.
• Valuation: The lender usually orders this (you usually pay the fee), to verify the value and the market rent expectations.

A long lease to a stable tenant would generally be considered more favourable than a short lease that is about to expire.

4) Cash buffer and running costs (yes, they care)

Another factor that lenders would like to be assured is that the SMSF is able to shoulder the ongoing costs of the property without scrambling.

• Post-settlement liquidity indications: They will ensure that you are not emptying the fund to zero so that you can make the purchase.
• Expenses budget/allowances: Insurance, rates, property management and surprise costs.

Commercial properties can result in substantial expenses, such as roof issues, fire code compliance, or extensive HVAC repairs. Therefore, it is crucial that the fund has sufficient financial capacity, particularly for commercial buildings maintenance, to handle these hefty bills.

5) Member guarantees + personal documents (the human part).

Despite limited-recourse lending, a lot of lenders still demand personal guarantees by SMSF members.

You’ll often be asked for:

• ID documents: Driver licence/passport.
• Personal tax returns + notices of assessment (usually 2 years).
• Personal assets and liabilities statement: This is a picture of what you have/owe outside super.

In simple terms: they are assessing whether you appear to be stable and low-risk in financial terms in case things become tight.

An easy to make (without going crazy) preparation.

To get this manageable, do it in the following order:

• Collect fund documents (SMSF deed, trustee details, Bare Trust deed draft/executed version).
• Gather the previous 2 years SMSF financial statements and tax returns, and current bank statements.
• Sign the property documents (contract + lease) and prepare the valuation process.
• Plan for a clear cash buffer to make the lender see that you have thought beyond settlement day.
• Prepare your own records to ensure requirements on guarantees.

Wrap-up

Lenders are not out to make this painful, they are just ensuring that the SMSF is in compliance, that the property income justifies the loan and that the members who are behind it are sound financially. By structuring your application pack in those three objectives (fund, property, people), your process of securing a commercial SMSF loan will be much more likely to proceed without any hitches.