A good environment is a must for a good piece of work. With a workplace tailored to your business, you can take your business dreams to the next level. If you are a self-employed whether it be a Lawyer, Doctor, Chartered Accountant or a Self Employed Businessman you need a proper workplace where you can work with a peace of mind and an environment which gives you inner motivation towards your work. To purchase such a commercial property it is a bit difficult as the price of such property is comparatively higher than a residential property and people generally opt for business loans to fulfil this need. However, to overcome such a problem -Non Residential property or a commercial property loan will help you own a workplace of your choice so that you can take a step closer to your business goals. However, there are many business funding and bank loan for a new business loan are available but it’s also important to knowledge and become aware of commercial property loan, which can help you build your business infrastructure.

What is a Commercial Property Loan?

A Commercial Property Loan is a basically financing of a fixed property used exclusively by a borrower to purchase a property for the commercial use. A borrower can take the loan and then provide it for rent as well. But here one important point which should be followed is even the tenant to which you are providing your property should use it only for professional or other services for financial gain. This includes property for office and general commercial accommodation.

All You Need to Know about Commercial Property Loans

Commercial Property Loan can be availed for the following purposes:

  • The purchase of a new office
  • The purchase of a shop  and clinic
  • The extension, improvement of an office or clinic
  • Construction of an office, marts or shops
  • SMEs for building their business infrastructure the premises for work
  • The purchase of property for operating business
  • Developers of properties for rent to SMEs

The Commercial Lending Process

The commercial lending process is generally same as that of residential property lending when it comes to applying with a lender for a commercial property loan.

Key criteria considered by the lenders for lending a commercial property loan are-

  • Applicant’s capacity to repay – This includes all of your income
  • Applicant’s deposit and any available equity
  • The type of commercial property for which loan is to be availed – it includes checking about whether it’s a factory, office, warehouse or shop-front and its location, together with a value report.
  • Details about the commercial property lease and other conditions if any.

What should You Know in Advance?

Specialised Commercial Lenders

Commercial loans may be less familiar with most of the people, but there are many loan options available from a range of specialized lenders for a commercial property loan.

Interest Rate

A commercial property is often granted at higher interest rates and more restrictive conditions than residential property loan.

Lower Loan to Value Ratios on Commercial Loan = Larger Deposits

Where in a residential property you can borrow up to 90% of the value of the property (LVR). But in a Commercial property loan, you can borrow normally only 70%. This means you need generally a larger deposit or the other possible thing is be able to access more equity.

Commercial Property Loan

Shorter Loan Terms

A typical home loan tenure is generally 30 years, whereas for a commercial property it is generally between 15 to 20 years only. As a consequence of this- the borrowers need to show a lender a greater capacity to repay, as the repayments will be higher as the principal will need to be paid down in a much shorter time period. All this leads to a high EMI.

Different Lease Terms

There are so many commercial lease terms and conditions. In which some leases can provide benefits and incentives that can enhance an applicant’s loan application. For example the time period of lease and outgoings being paid by tenants.

Getting a commercial property loan isn’t much harder than applying for a regular mortgage, or a residential loan. A greater capacity to repay a commercial property loan given the shorter loan terms of between 15-20 years add-ons to the eligibility of the borrower.  Having a higher deposit/equity will also an add-on to the borrowing capacity of the applicant and of course finding a suitable lender is also a must to enjoy the whole tenure of borrowing.