What Dance Studio Owners Should Know About Commercial Property Finance
Buying the premises your dance studio already trades from is a defining step for any studio operator. At Ardent Capital Group we speak with studio owners about this kind of commercial property purchase regularly, so this guide walks through how a lender sees a studio freehold, what sets the deposit, and how the finance is commonly structured.
Ardent Capital Group is a specialist in commercial mortgages for dance studio operators across Australia. Our team can help you move from tenant to owner, and give you clear lending advice on structure and strategy.
- We arrange finance from $100,000 to $10,000,000+, matched to studio cash flow and property type.
- Over a decade, we have helped facilitate more than $500,000,000 in funding for 1,000+ borrowers nationwide.
- We service Sydney, Melbourne, Brisbane, Gold Coast, Perth, Adelaide, Canberra, Hobart and surrounding regional towns.
- We manage the process end to end, from lender selection and structure to valuation, terms and settlement.
The case for owning your dance studio premises
A studio fit-out is capital intensive and tailored to the space. Sprung or semi-sprung floors, Marley or timber surfaces, acoustic treatment, mirrors, fixed and portable barres, change rooms, reception and AV are sunk costs if you move at lease expiry. Owning the building locks in the benefit of that spend and reduces relocation risk.
Location drives enrolments. Proximity to schools, safe evening access, parking for drop-off and pick-up, ceiling height and column-free space are not easy to replicate. Ownership helps preserve timetable stability and term-by-term retention.
Studios often show resilient revenue through diversified classes, concerts, intensives and subletting to Pilates, yoga or performance groups. Repayments build equity in an owned asset that can support future expansion.
Main drivers:
- Control of hours, noise mitigation and fit-out without landlord restrictions that constrain class scheduling and event rehearsals.
- Protection against rent escalation and relocation that disrupts enrolments and instructor retention.
- Ability to sublet off-peak time slots to complementary operators and capture additional income.
- Equity creation in a property aligned to your brand and timetable requirements.
Ownership suits studios with a stable timetable and a medium-term horizon at the site. If a larger move is likely within a year or two, or capital is better placed in staffing and production for now, leasing may serve you better in the meantime, and we are glad to help you weigh the timing.
We arrange the dance studio property loan end to end, from lender selection through to settlement.
Financing a dance studio: how it works
Deposit and LVR. Loan-to-value ratios for standard commercial security like a studio freehold reach up to 80 per cent with the non-bank lenders that publish a figure, which points to a deposit from around 20 per cent plus costs. The major banks do not publish an owner-occupier commercial LVR and assess each purchase case by case, which is one reason a broker helps. Where you hold equity in other property to add as security, some lenders will fund up to 100 per cent of the purchase price against the combined security.
Loan term and structure. The banks' published commercial terms commonly run 10 to 15 years, while non-bank lenders publish 25 to 30 years. Facilities can be principal and interest for steady amortisation, or interest only for a defined period of up to five years where cash flow is building, for example during a staged fit-out or multi-term enrolment cycle.
Security and serviceability. The property is the primary security. Lenders assess studio financials, including two years of trading where available, BAS, current year performance and add-backs such as depreciation. They will look at revenue mix across classes, private lessons, sublets and events, plus seasonality across school terms.
Owner-occupier treatment. Lenders generally view owner-occupier purchases favourably because the trading business is tied to the premises, vacancy risk is reduced and the fit-out is purpose built.
How the deal is put together
Many dance studio operators hold the freehold in a separate company or trust and lease it back to the trading studio at a market rent. A lender then reads that inter-entity rent as the serviceability line, and the two-entity split keeps the property clear of operating risk while supporting clean accounting between the landlord and tenant entities. We arrange the finance around that structure and work through the figures with you and your accountant before anything is locked in.
A self-managed super fund is another arrangement lenders see. Commercial premises usually qualify as business real property, so an SMSF can hold the studio through a limited recourse borrowing arrangement, with a bare (custodian) trust holding title until the loan is repaid, and lease it back to the trading entity at market rent. SMSF commercial lending gears from around 65 to 80 per cent, the fund needs its own deposit, and cross-collateralisation with assets outside the fund is not available under a limited recourse arrangement. We arrange the borrowing side of that structure; your accountant and SMSF specialist confirm the tax, super and ownership detail specific to your fund before contracts are signed.
What credit teams weigh up
- Business financials: Two years of financials where available, BAS, year-to-date performance, margins by class stream and the impact of concerts and intensives.
- Serviceability: Historical and forward-looking cash flow, debt service coverage, sensitivity to term breaks and holiday periods, and treatment of sublease income.
- Property and valuation: Zoning for indoor recreation, ceiling height and column spacing, slab quality for sprung floors, acoustic isolation from neighbours, egress and parking.
- Deposit and equity position: Cash, retained profits, directors' contribution and the ability to leverage your equity in other property as additional security where appropriate.
- Lease and occupancy: Owner-occupied intent, any subleases to complementary operators, and documented market rent if using a related-party lease.
A specialist broker matters for the dance studio sector because property suitability, fit-out and revenue seasonality directly affect structure, valuation and lender selection.
A situation we could help with
This is an illustrative scenario that shows the kind of situation we can assist with, and how the thinking might run.
Consider a Melbourne studio with two leased sites, 650 students and 14 instructors, both leases expiring in 18 months. The target property is a 600 sqm warehouse conversion with 6.5 m clearance, two halls, reception, change rooms and 22 on-title parks. The purchase price is $2,400,000 with a fit-out budget of $320,000.
The paths we would map include:
- An owner-occupier purchase held in a company with a family trust as shareholder, leased back to the trading entity at market rent.
- An SMSF acquisition through a limited recourse borrowing arrangement, leased back at market rent.
- Adding residential equity as security to lift the borrowing and reduce the cash deposit.
- Staging the fit-out across a split facility, a property loan alongside equipment and fit-out finance, to preserve working capital.
How we would approach it: at around 75 per cent LVR the debt would sit near $1,800,000 with a cash deposit close to $600,000 plus costs, and adding equity you already hold can lift the borrowing further. We would map the ranges, structures, covenant settings and repayments for each path so you can weigh the trade-offs with your accountant. The figures above are illustrative, not confirmed outcomes.
Other finance we arrange for dance studio operators
- Asset finance for studio equipment. Fund sprung or semi-sprung floors, Marley surfaces, mirrors, fixed barres, AV, sound and lighting through studio equipment finance on terms aligned to equipment life.
- Fit-out and refurbishment finance. Cover walls, acoustic treatment, change rooms, reception, HVAC and amenities without over-drawing working capital.
- Working capital loans. Smooth enrolment and holiday seasonality with working capital for a dance studio, pre-pay costumes or venue hire for concerts, and manage term rollovers.
- Business overdraft. Flexible buffer for payroll timing, show production costs and supplier invoices between terms.
- Refinancing and debt consolidation. Reset covenants, improve pricing and consolidate multiple facilities into a clear structure that matches studio cash flow.
- Construction and renovation. Fund warehouse conversions, mezzanine removal for clear span space, acoustic upgrades and compliant egress.
- Business or premises acquisition finance. Buy a second site, bring a partner in or buy out, or purchase the freehold of your current location.
Owning the premises can free equity for future expansion, while a refinance can consolidate facilities and simplify cash management.
Why dance studio owners work with Ardent
Ardent Capital Group specialises in commercial mortgages for dance studios. We arrange and structure the finance around how you plan to hold and occupy the property, including related-party leases and fit-out funding.
We service Sydney, Melbourne, Brisbane, Gold Coast, Perth, Adelaide, Canberra and surrounding metro and regional areas. We have helped facilitate over $500,000,000 in funding over a decade for more than 1,000 borrowers. Talk to us when you are ready to weigh your options. Our job is to organise the lending so the structure and strategy support the years ahead, not just this settlement.
Dance Studio Finance FAQs
How much deposit do I need to buy a dance studio freehold?
Standard commercial security like a studio freehold gears up to 80 per cent with the non-bank lenders that publish a figure, so plan for a deposit from around 20 per cent plus costs. The major banks assess owner-occupier purchases case by case rather than to a published figure.
Can I use my home equity to help with the purchase?
Yes, you can leverage your equity in residential property to support a higher LVR or reduce the cash deposit, subject to lender policy and valuation.
Will lenders accept my studio's seasonal cash flow?
Lenders account for term-based enrolments and holiday dips by looking at full-year performance, margins and buffers. Clear reporting on classes, sublets and events supports serviceability.
Can my SMSF buy the property and lease it back to the studio?
Commercial premises usually qualify as business real property. An SMSF can purchase and lease back at market rent under a limited recourse borrowing arrangement, with specific rules that affect gearing and cash flow.
What property features matter most to valuation for a studio?
Zoning for indoor recreation, adequate ceiling height and clear span, quality of slab for sprung floors, acoustic treatment, compliant egress and on-site parking are central to valuation and lender appetite.
Can I finance the fit-out as part of the purchase?
Yes, fit-out can be funded through a blend of the property loan and dedicated equipment or fit-out facilities, aligned to asset life to protect working capital.
Is owner-occupier finance different from investment finance for a studio?
Owner-occupier purchases are generally viewed more favourably by lenders, often with higher LVRs or sharper pricing, because the trading business is tied to the premises.
Written by
Nick Chong
Managing Director, M.AppFin, Dip. Mortgage Mgmt
Nick holds a Bachelor of Agricultural Economics, a Master of Applied Finance and an Advanced Diploma in Financial Planning. He founded Ardent Capital in 2016 after more than a decade in financial planning and mortgage broking. For the past ten years he has led a team of finance specialists, mortgage advisers, brokers and credit analysts, all working to secure optimal outcomes for clients and always acting in their best interests. The team brings both a qualitative and a quantitative approach to every deal.
