Commercial Property Loan
Commercial property loans are ideal for both investors and owner-occupiers, offering tailored solutions to meet different needs.
Investors, whether individuals or corporate entities, seek commercial property loans to acquire properties for rental income and long-term capital growth. These loans help investors expand their portfolios, whether for office spaces, retail centres, or industrial properties. With the potential for steady cash flow and appreciation, investors use commercial property loans to grow their wealth. However, they must also consider market risks such as vacancy rates, property management, and the economic health of the location.
For owner-occupiers, commercial property loans provide the opportunity to purchase or refinance a property for business use. This type of loan allows business owners to secure long-term stability by owning the premises they operate from, rather than leasing. It can be structured to benefit both the business and the individual, contributing to personal wealth growth while ensuring business continuity and financial security.
Whether you're investing for profit or securing a property for your business, a commercial property loan is a powerful financial tool to achieve your goals.
Eligibility Criteria For Commercial Property Loans
When applying for a commercial property loan, understanding what lenders require is crucial, as these factors will determine your eligibility and the terms of your loan.
Key factors lenders consider:
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Credit Score: A strong credit score is essential. Lenders assess your credit history to evaluate your reliability in repaying loans. A higher credit score increases your chances of approval and securing better loan terms.
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Financial History: Lenders will closely examine your business’s financial records, such as profit-and-loss statements, tax returns, and balance sheets. A solid financial history highlights your business’s stability and ability to manage debt responsibly.
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Business Revenue: Consistent and sufficient revenue is a key factor for loan approval. Lenders want to ensure your business generates enough income to comfortably cover loan repayments.
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Loan Amount: The size of the loan you’re seeking should align with your business's financial capacity. Larger loan amounts pose greater risks for lenders, so they are more cautious when approving them.
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Security: Most commercial property loans require collateral. Common properties like offices, factories, and retail spaces are preferred, as they are easier to value and sell. Specialised properties, such as hotels, farms, or restaurants, may be considered higher risk and require more detailed assessments.
By meeting these key requirements, you can increase your chances of securing the right commercial property loan for your business needs.
How Much Can I Borrow?
The amount you can borrow generally depends on the lender, the loan product and their assessment of your application.
Typically, you may be able to borrow anywhere from $250,000 to $50,000,000 with a commercial property loan. However, loans over $5 million to $50 million have stricter lending criteria and covenants.
Our mortgage brokers understand which banks assess business loans more favourably. You can call us on (03) 9566 7247 to find out if you qualify and how much you can borrow.
Proving Serviceability For A Commercial Property Loan
Income verification requirements differ based on the type of loan you’re applying for:
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Full Doc: Requires full financial documents, including two years financial statements and tax returns for both the borrowing entity and its guarantors, which may include directors and/or corporate guarantors.
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Lease Doc: Unlike full doc, lease doc loans focus on the property’s ability to generate income through rental payments. In this case, the lender assesses the strength and stability of the existing lease agreement to determine the loan amount and its suitability for the borrower. The stability of the tenant, lease duration, and rental income are key factors in the lender’s decision-making process.
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Low Doc: Typically require at least 2 or 3 of either Bank Statements, Accountant's Letter, BAS Statement and a statement from the borrower (or guarantors) declaring their income and ability to service the loan.
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No Doc: Reserved for corporate borrowers only. This type of loan is known as an asset lend because the lender is primarily relying on the value and saleability of the security rather than the strength of the borrower. To compensate for the higher risk involved, Lenders will offer a lower LVR and higher interest rate.
Applying for a Commercial Property Loan
When you're ready to apply for a commercial property loan, understanding the process can make things easier. Here’s a step-by-step guide to what to expect, the documents you'll need, and how to make the process run smoothly.
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Initial Consultation: We begin by discussing your business goals and financial needs. This helps us understand your situation and identify the best commercial property loan options suited to your requirements.
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Document Submission and Review: You'll need to provide essential documents such as financial statements, details of the property, lease agreement, and any relevant business plans. We carefully review these to assess your financial position and overall objectives.
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Lender Negotiation: Once we understand your needs, we reach out to various lenders to negotiate favourable loan terms. Our goal is to secure a lender who not only approves your loan but also offers competitive interest rates and conditions.
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Indicative Term Sheet (ITS): Following discussions with lenders, we present you with an IndicativeTerm Sheet (ITS). This document outlines the proposed loan terms, giving you a clear idea of what to expect.
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Application Submission: Once you approve the Term Sheet, we arrange for a property valuation and submit a complete loan application to your chosen lender. This includes a detailed financial review and an in-depth presentation of your case.
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Co-ordination with Your Team: We work closely with your solicitor and accountant throughout the process, ensuring their input is included. This collaboration helps secure the best possible outcome for your business.
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Finalisation: If the lender raises any concerns, we’ll work with you to address them, possibly renegotiating terms or submitting additional documents. Once the loan is approved, we finalise the process by ensuring all conditions are met and funds are ready for your property purchase or investment.
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Adding Extra Value: Our support doesn't stop at securing your loan. We also provide expert advice on how to increase the value of your commercial property, making it more appealing to future buyers or tenants.
Interest Rate and Terms for Commercial Property Loan
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Borrower: Individuals, companies, trusts and self-managed superannuation funds are acceptable.
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Term: 15-30 years.
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Interest Rate: Dependent on the risk profile of the borrower. Typically is slightly higher than a home loan.
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Interest Only: Up to 5 years.
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Loan Type: Variable or fixed (up to 5 years).
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Additional Repayments: Available on variable loans.
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Offset Account: Available (lender specific).
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Redraw: Available (lender specific).
Interest Rate and Terms for Commercial Property Loan
At Avenstone, we bring 20 years of experience in commercial lending, which has allowed us to build strong relationships with a wide range of lenders. This expertise enables us to identify which lenders offer the most favourable policies that align with your specific needs. We can also leverage our experience to negotiate higher Loan-to-Value Ratios (LVR) and secure better terms with fewer conditions and covenants, ensuring the best possible outcome for your commercial property loan.
Ready to talk to someone?
Book a free 30-minute discovery call with our expert team at Avenstone today. We’ll take the time to understand your goals and provide tailored advice on optimising your financing options. Our aim is to ensure you secure the best terms possible, and our team is dedicated to guiding you to the right lender and loan solution. Click the button below to schedule your free call and discover how Avenstone can assist in growing your property portfolio and achieving your business goals.
Years Experience
20+
in Residential & Commercial Banking