Need a commercial loan

Investing in Commercial Property Tips

I understand finding the right commercial loan can be complex or overwelming  if you are looking to invest or use the premises for your business.

Some general key point when purchasing commercial property when you need a commercial loan.

• LVR can very depending upon the type of property security. Most banks do 65 to 70% LVR also there are a few banks who can go up to 80% LVR on commercial properties “depending on the security type”,
• Interest rate; Will vary a lot from bank to bank based upon the following; LVR, loan amount (below $1.0M or over $1.0m loans) to applicants risk profile E.g. total assets and liabilities and type of industry or business ANZSIC code.
• Most banks will charge an application fee. Some banks do have no application fees waivers.
• Valuation report on the Commercial property is at purchaser cost.
• Commercial loans generally have monthly fee. This will vary from bank to bank and the type of commercial loan.
• Generally most bank do not offer offset account with commercial loans, there is few smaller banks offering 100% offset account.
• Most banks only do commercial loans if it is trading business purchasing the property..
• Loan terms will vary with banks. Generally commercial loan terms are 15 years, with 5 years interest only, there are other banks who offer 20, 25 and 30 year loan term with 5 years interest only periods.
• Loans under $1.5 Million, do not have annual reviews.
• Loans over $1.5 Million will have annual years by the bank. Basically, each year the bank and your Broker will call you for update financial information, to make sure your business or your income is the same as the initial application and has not dropped.
• There are a few smaller banks who offer no annual review for loans over $1.5 Million “basically set and forget”. Lately this has become very popular with my customers. As one of my customer noted; “no more annoying questions from the bank and I can just get on running my business”

Types of commercial loans

• Full documentation application: Basically, all personal information about the purchaser, which will include. Assets, Liabilities, Income streams etc. “lots of paperwork”
• Low doc applications: Minimum financial information. E.g. using BAS statements, with self-declared and/or accountants letter.
• Lease doc or standalone application; Some banks offer application based upon the fully arm’s length lease income and if the lease income meets the loans Interest cover ratio “ICR” to service the loan. This type of application are very common with business persons who have very complex business structure and does like doing full application with the endless requests from banks for more information and having some banker telling how you should run your business and asking silly question which defi logic.
• No Doc applications; These types of application are for short term periods only, generally max 3 years. They are designed for someone or company to buy a commercial premises without using financial information. Example. You find a property or land you like, and you need to make decision very quickly to buy or lose it. But your financials have not been completed or you cannot afford to wait for the banks to approve the application ‘You get the general idea”. Please note: This product has a low LVR and the interest rate are higher.

I can guide you through finance options:

• Purchase a business
• Working capital for your business
• Refinance your business loans.
• Purchase a commercial property
• Build a commercial property, for either investment or owner occupied.
• Invoice financing or known as debtor financing 

If you are planning on purchasing commercial property or buy a business, it is recommended to talk to your Broker not the bank. Reason; Your bank only has their loan products. Brokers have all banks loan products to choose from. Unfortunately your bank might not have the loan product that would suit needs and your business.

Mortgage Choice in Northcote Victoria I am happy to discuss your commercial loan options with you and help explain loan strategies to owning commercial property.

Want to know more? Feel free to contact me at my office, I am always happy to help answer any of your questions.

Phone 0418 604 910 or email simon.bowler@mortgagechoice.com.au