How to Get a Loan for a Commercial Property: 2024 Guide

Maxiron Capital is the top commercial lender specialising in tailored property loan solutions for Australians and businesses. We offer flexible, low-rate lending products with fast approvals and personalised service, including business loans for financing commercial properties such as offices, retail stores, industrial warehouses, and hotels.

Commercial finance plays a crucial role in capitalising on business opportunities, and we provide customised solutions to meet specific financial goals. Our expertise ensures efficient navigation of commercial property loan complexities for optimal outcomes.

Maxiron Capital provides various loan products, including first, second, and third mortgages, and bridging loans. We cater to loan sizes from $250,000 to $12 million, with terms from 1 to 24 months, meeting diverse client needs.

Understanding Commercial Property Loans

The primary purpose of a commercial property loan is to facilitate business operations, whether by acquiring a new property, refinancing an existing one, or funding renovations and improvements. These loans are essential for businesses looking to expand their physical footprint, improve their facilities, or invest in lucrative commercial properties. However, financing a commercial property investment comes with complexities and challenges, such as higher risk compared to residential properties, stringent loan approval requirements, different lending criteria and interest rates, the necessity of having leases in place, and the need for specialised expertise to navigate the process effectively.

Distinction Between Commercial and Residential Property Loans

While both commercial and residential property loans involve borrowing funds to purchase property, there are key differences between the two. Unlike residential property, commercial property loans are considered higher-risk investments and are for businesses acquiring properties for operational or investment purposes.

Commercial property loans typically have higher loan amounts and more stringent approval criteria compared to residential loans. The interest rates, loan terms, and repayment structures also differ, reflecting the higher risk and greater complexity associated with commercial properties. Moreover, commercial property loans often require more detailed financial documentation and property appraisals to secure approval.

Types of Commercial Property Loans

Owner-Occupied Loans

Owner-occupied loans are intended for businesses purchasing premises to operate from. These loans can offer up to 100% financing, making them an attractive option for businesses looking to establish or expand their operations without a significant upfront investment. Financing a commercial property purchase involves understanding loan requirements, deposit and equity considerations, and the differences between commercial and residential property lending.

The benefits of owner-occupied loans include building equity in the property and achieving long-term stability for the business. By owning their premises, businesses can avoid the uncertainties associated with leasing, such as rent increases and lease terminations. Additionally, owning property can enhance a business’s financial standing and provide collateral for future borrowing needs.

Investment Loans

Investment loans are designed for purchasing properties intended for leasing to tenants. For commercial property investors, these loans involve specific requirements and complexities, such as providing details of lease agreements, demonstrating rental income, and showing financial stability. These loans can provide up to 80% financing, allowing investors to leverage their capital and maximise their returns. The primary advantages of investment loans include generating rental income and potential capital appreciation.

Investment loans enable businesses and investors to acquire commercial properties that can generate a steady stream of rental income. This income can be used to cover loan repayments and operating expenses, while the property’s value appreciates over time. Investment loans are ideal for those looking to build a diversified real estate portfolio and achieve long-term financial growth.

Working Capital Loans

Key Factors in Securing a Loan

Purpose of the Loan

Determining the purpose of the loan is a crucial step in the application process. Whether the loan is for investment, owner-occupied, working capital purposes, or commercial loans, which often have higher interest rates, shorter loan terms, and loan set-up fees, will influence the loan terms, interest rates, and approval criteria. Each loan purpose carries different risk levels, and lenders will assess the application accordingly.

For example, investment loans for well-located commercial properties with stable rental income are generally considered lower risk. In contrast, working capital loans that use property as collateral for operational expenses may be viewed as higher risk due to the variable nature of business cash flow.

Property Valuation

The valuation of the property plays a significant role in the loan approval process. Lenders will consider factors such as the property’s location, condition, and market demand when determining its value. A well-located and well-maintained property is more likely to secure favourable loan terms.

Location is a critical factor in property valuation. Properties in high-demand areas with robust economic activity and infrastructure are typically valued higher. The condition and appeal of the property also impact its value; well-maintained properties with modern amenities are more attractive to lenders.

Loan-to-Value Ratio (LVR)

The Loan-to-Value Ratio (LVR) determines the maximum loan amount relative to the property’s value. A higher LVR means a lower deposit requirement but may result in higher interest rates due to increased risk for the lender. Understanding the LVR is essential for borrowers to determine their deposit requirements and potential loan costs.

Lenders typically have different LVR limits based on the type of property and its intended use. For example, investment properties may have an LVR limit of 80%, while owner-occupied properties could have higher LVR limits. Borrowers should aim to provide a substantial deposit to secure better loan terms and reduce overall borrowing costs.

Income and Security

Providing comprehensive financial documentation is crucial for securing a commercial property loan. Lenders will require full documentation, including financial statements, tax returns, and lease agreements. Working with different commercial property lenders, including banks and non-banks, can offer various benefits such as tailored loan options and competitive interest rates. In some cases, low doc options and financial forecasts can be used, depending on the borrower’s situation.

Income verification is a critical aspect of the loan approval process. Lenders need to ensure that the borrower has a stable and sufficient income to cover loan repayments. This verification can include rental income from the property, business income, or other sources of revenue.

Maxiron Capital’s No Doc Commercial Property Loan

Maxiron Capital offers a No Doc Commercial Property Loan aimed at companies, partnerships, and individuals with a genuine business purpose.

This loan product may offer loans for borrowers with existing mortgages, with potential loan sizes ranging widely from $500,000 to $12 million. Terms could also extend up to 24 months, depending on the specific lending criteria.

A LVR of up to 75% may also be considered.

Some potential benefits of Maxiron Capital’s No Doc Commercial Property Loan include:

All commercial properties are considered
No WALE requirement (weighted average lease expiry)
Accepts vacant property
Interest rate from 9.5% per annum
No early termination fee
Low valuation fee

This product is especially suited for those who require flexible and fast access to funds, even in cases where traditional documentation might be challenging to provide.

Steps to Apply for a Commercial Property Loan

STEP 1 – Get A Quote

Reach out to our lending team to discuss your needs and obtain a personalised quote. Our team will assess your financial situation, property details, and loan requirements to provide an accurate and competitive quote.

STEP 2 – Get Approval

Submit the necessary documentation for a comprehensive assessment. Once approved, you will receive a letter of approval outlining the loan terms and conditions. Review the approval letter carefully and sign it to proceed with the loan.

STEP 3 – Deal Settled

Initiate the settlement process, leading to the disbursement of funds. Our team will work closely with you to ensure a smooth and efficient settlement, allowing you to focus on your business goals.

Why Choose Maxiron Capital?

Expertise and Experience

Maxiron Capital specialises in commercial lending, offering in-depth knowledge and industry insights. Our experienced team understands the complexities of commercial property loans and is dedicated to providing the best solutions for our clients.

Customised Solutions

We offer loans tailored to meet individual business needs, ensuring the best fit for each client. Our flexible loan structures and personalised service set us apart from traditional lenders.

Competitive Rates

Maxiron Capital provides access to a wide range of financing options at competitive rates. We work with a network of lenders to find the best terms and conditions for our clients.

Client-Focused Approach

We are dedicated to supporting clients throughout the loan process, offering personalised service and guidance. Our client-focused approach ensures that each borrower receives the attention and support they need to achieve their financial goals.

FAQs

What is a commercial loan and what are they used for?

A commercial loan is used to finance business-related property purchases or improvements. They cater to various property types like office spaces, retail outlets, and industrial properties. These loans help businesses acquire, expand, or improve their commercial premises, supporting business growth and development.

How do I apply for a commercial loan?

Start by contacting our team for a quote, then submit the necessary documentation for assessment. Upon approval, sign the agreement, and proceed to settlement. Our team will guide you through each step of the process, ensuring a smooth and efficient application experience.

Can you get a mortgage on a commercial property?

Yes, commercial property mortgages are available for purchasing or refinancing business premises. These mortgages offer flexible terms and competitive rates, allowing businesses to secure the funding they need for their commercial property investments.

Can I get a commercial loan if I have a bad credit history?

We work with clients facing challenges in securing traditional bank financing, including those with bad credit histories. Our flexible lending criteria and extensive network of lenders enable us to find suitable financing solutions for clients with diverse financial backgrounds.

Can I get a commercial loan with my SMSF?

Yes, SMSFs can be used to secure loans for commercial property investments, with up to 90% LVR for owner-occupied properties. SMSF loans offer a unique opportunity for individuals to use their retirement savings to invest in commercial properties.

What is a business Flexi loan?

A business Flexi loan offers flexible funding options tailored to the unique needs of businesses. These loans often allow for variable repayment schedules and terms, providing businesses with the financial flexibility to manage their cash flow effectively.

Investopedia (2024) “Commercial Loan” https://www.investopedia.com/terms/c/commercial-loan.asp Accessed: 23-07-2024

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