commercial property loan

how to source and structure the right commercial property loan that provides up to 80% of the property value - without the hassles and risks of yearly reviews...

So you can stop paying rent, and potentially save thousands in interest and fees

want to stop paying rent and get your own commercial property, but have some of these common concerns?

Like many self-employed business owners considering a commercial property loan, are you…

Unsure if a commercial property is within your reach… and want expert, advice so you know how much you may be able to borrow and what the repayments would look like?

Concerned your local bank or broker may not have the product options (or expertise) to help you structure your loan for maximum borrowing capacity, and flexibility?

Too busy to compare dozens of loans from multiple lenders… and wish you had a trustworthy expert to do all the legwork for you?

Worried about getting declined (and having your credit rating damaged) or making other expensive mistakes that could needlessly cost you thousands and leave your business and assets exposed?

And like most business owners, do you want to know how to source and structure the right commercial property loan, so you can stop paying rent, and potentially save thousands in interest and fees.

Many self-employed business owners have these same questions and concerns. That’s why we developed a no-obligation, Complimentary Consultation where you can get the information you need to help you get the right commercial property loan for your business.

commercial property loans

If you’re thinking of venturing into the commercial property market as a business owner or investor, here are several finance options that you may find suitable depending on your individual situation.

Commercial property loans provide flexible funding solutions for business owners and investors looking to purchase or refinance commercial real estate. In this guide, we will delve into the different loan types, their terms, eligibility criteria, acceptable security types, and more.

Commercial Property Loan Types

Commercial property loans come in different variations to cater to the diverse needs of business owners and other borrowers. Let’s take a closer look at the most common types of commercial property loans:

  • Full Documentation Loans

Ideally if you can provide full business financials, such as two years business financial statements along with two years tax returns, then you may be eligible for a full documentation loan.

Interest rates for full documentation loans are usually much more competitive when you compare them with Alternative Document loans.

Full documentation loans usually offer flexible repayment options, including principal and interest or interest-only payments. Fees and charges will vary depending on which lender, loan term and property type.

It’s best to speak to a professional to get details on your individual situation.

  • Alternative or Low Documentation Loans

Alternative documentation loans, also known as low doc loans, are designed for borrowers who may not have all the necessary financial documentation which is typically required for a full documentation loan.

These loans offer an alternative application process, requiring less paperwork and documentation to verify your business income. They are ideal for self-employed individuals or small business owners who have difficulty providing traditional financial statements.

  • Lease Documentation Loans

Lease documentation loans, also referred to as lease doc loans, cater to investors seeking a simplified assessment process for investment purposes.

These loans are secured by the lease agreements of the property rather than traditional financial documentation. They could be a viable option for borrowers who generate income from lease agreements.

Loan Terms and Annual Reviews

Commercial property loans offer flexible loan terms tailored to meet the specific needs of borrowers. The typical loan terms range from 15 to 30 years, providing borrowers with the freedom to choose a repayment period that aligns with their financial goals.

  • Annual Reviews:

Annual reviews are frequently required for commercial property loans, as opposed to most residential mortgages. If your business experiences a year with lower income because of various reasons, this could have a negative impact.

  • No Annual Review:

On the other hand, there are some lenders that don’t require an annual review, which means that once the loan is approved and the terms are set, borrowers can enjoy a “set and forget” approach without the hassle of an annual review, and you won’t need to provide updated financial statements each year.

Acceptable Security Types

Commercial property loans are primarily secured by the commercial property itself. However, in certain cases, residential properties can also be accepted as security. The acceptable security types for commercial property loans include:

Commercial properties, such as offices, industrial properties (warehouses and workshops), and retail properties (shops).
Residential properties, depending on the zoning and use of the property.

It’s important to note that the acceptability of security properties may vary from lender to lender. Before proceeding with a commercial property purchase, it is advisable to consult with a finance specialist to determine the acceptable security types for your specific commercial property loan requirements.

Eligibility Criteria

To be eligible for a commercial property loan, borrowers must meet certain criteria. The eligibility criteria may vary slightly depending on the lender, but generally include the following:

  • Natural persons: Permanent residents or citizens of Australia living and working in Australia.
  • Sole traders and partnerships.
  • Companies and trusts: In most cases, if a company intends to borrow money, it is required to be incorporated and domiciled in Australia. Additionally, many lenders may request that the directors of the business act as guarantors for the loan.

It is important to note that these are general eligibility criteria, and specific lenders may have additional requirements. It is advisable to consult with a finance specialist to determine your eligibility for a commercial property loan.

Loan Amount and Loan-to-Value Ratio (LVR)

The loan amount and loan-to-value ratio (LVR) are important considerations when applying for a commercial property loan. The loan amount refers to the total amount of money you are seeking to borrow, while the LVR represents the percentage of the property value that the lender is willing to finance.

The maximum loan amount and LVR can vary based on factors such as the location of the property and the lender’s specific policies. As a general guideline, the LVR can range up to 70% and some lenders will allow up to 80% LVR for certain properties.

It’s important to note that a higher loan amount may require a larger deposit to complete the purchase. The deposit amount will depend on the loan amount, property type, and the lender’s specific requirements.

By consulting with a finance specialist, you can determine if your particular scenario will work based on your individual goals, needs, and objectives, which will be helpful in making informed decisions.

Cash-Out and Equity Release Options

Commercial property loans often provide borrowers with the option for cash-out or equity release. Cash-out refers to the ability to access the equity built up in the property for business or investment purposes. This can provide additional funds for business expansion, renovations, or other investment opportunities.

However, it’s important to note that cash-out options are typically not available for working capital purposes. Lenders may have restrictions on how the cash-out funds can be used. This varies from lender to lender, so it’s best to speak with us about your scenario before moving forward.

Interest-Only Options

Interest-only options are available for commercial property loans, providing borrowers with flexibility in their repayment structure. These options allow borrowers to make interest-only payments for a specific period, typically up to five years. However, it’s important to note that for some lenders, the interest-only period may be shorter if the LVR exceeds 70%.

Interest-only options can be beneficial for borrowers who want to manage their cash flow or have specific investment strategies in place. Consulting with a finance specialist will help you understand the interest-only options available and determine the best approach for your financial goals.

Loan Purposes and Property Use

Commercial property loans can be used for various purposes, including:

  • Property purchase: Commercial property loans can be used to finance the purchase of commercial properties, allowing business owners and investors to acquire the space they need for their operations or investment portfolio.
  • Refinance: Borrowers can use commercial property loans to refinance existing loans, potentially taking advantage of better interest rates or more favorable loan terms.
  • Property improvement: Loans can also be used to fund renovations, expansions, or other improvements to existing commercial properties.

Commercial property loans are suitable for property owner-operators and investors alike. Whether you are looking to purchase a property for your business or expand your investment portfolio, a commercial property loan can provide the necessary funding.

Annual Reviews and Security Property Requirements

As mentioned earlier, annual reviews are not always required for commercial property loans. However, in some cases, lenders may conduct valuations every three years as part of the loan agreement. The cost of these valuations can vary and may be borne by the lender or the borrower, depending on the specific terms of the loan.

Acceptable security properties for commercial loans can include a wide range of properties, including offices, industrial properties, retail properties, and even certain residential properties. However, it is important to note that the acceptability of security properties may vary from lender to lender. Consulting with a finance specialist will help you navigate the requirements and select the most suitable lender for your needs.

Conclusion

Commercial property loans offer flexible and tailored financing solutions for business owners and investors. Whether you’re looking to purchase a commercial property or refinance an existing loan, understanding the various loan types, eligibility criteria, loan terms, and security requirements is essential.

By consulting with a finance specialist and exploring the options available, you can secure the funding needed to grow your business or investment portfolio. With competitive interest rates, flexible repayment options, and the ability to access equity for business purposes, commercial property loans can be a valuable tool in achieving your financial goals.

Remember to conduct thorough research, compare different lenders, and seek expert advice to ensure you make informed decisions that align with your specific needs and objectives. With the right commercial property loan, you can take the next steps towards success in the commercial property market.

 

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