Buying a commercial property, whether it is for your own business or as an investment, can be quite a convoluted process. Lenders’ appetite for different commercial properties can vary significantly depending on the current market conditions.
Commercial Property Types
There are two types of commercial property: Standard Commercial, and Specialised Commercial. Different lenders may have some restrictions depending on the type of property. Below are examples of each property type.
- Retail and shop fronts
- Residential (unit developments)
- Child care premises
- Petrol stations
- Commercial developments
- Land subdivisions
- Farms and rural properties
- Car yards
- Accomodation premises (including leasehold for motels)
- Restaurants, pubs and hotels
- Vineyards and distilleries
How much can I borrow against the property?
With commercial loans, these are also based predominately on risk which can impact LVR (Loan to Value Ratio) and interest rate. Every lender has their own risk profile and the maximum LVR which does change and fluctuate.
- If you have other security or equity in other property offered as collateral then you can normally borrow up to 100% of the value of the purchase property.
- For Standard type securities then you can usually borrow between 60-80% depending on the purpose and the type of application.
- For Specialised type securities then you can usually borrow between 50-70% depending on the purpose and the type of application.
Another factor that can impact the LVR is the overall loan amount / exposure, this will typically start impacting the LVR from $1,000,000 loans above and depend on the purpose, type of loan and overall risk.
Here at Simplified Finance as part of our initial fact finding process we will assist in determining where your individual transaction sits from a risk point of view and can then start conversations with our lenders to review their appetite and your options.
Type of Application
For commercial applications there are 5 main types that are typically available and can be more flexible then residential lending as the governing legislation around commercial purpose loans is more flexible.
- Full Doc: This loan is more inline with a standard residential loan that requires full income verification and assets and liabilities, where this option is more thorough it will typically provide the highest LVR and lowest rates
- Lease Doc: This loan is for investment purchase where the lease demonstrates it can cover the repayments without any further contribution from the owner, normally the LVR would need to be on the lower side rental income alone to cover the loan payment unless the property has a very high rental yield.
- Low Doc: This loan requires some documentation which can be flexible like BAS, accountants letter or trading account statements, where the lender will use this to verify your stated income. Normally the rate will be impacted greater with any increase in LVR for this loan type.
- No Doc: This loan is where no documentation is provided and is usually a very restricted LVR and heavily loaded interest rate. They will also be for a shorter loan term where you would need to transfer this to a Full Doc loan within a certain period.
- Start up/forecasts: This loan is where you starting up a business and requires a full business plan, forecasts and projected profit & loss where the forecasts need to show how the business will make future payments.
How Do I Apply?
Firstly we need to understand your situation and goals so by submitting an enquiry we can get in contact with you. From there we will be able to assist with finding the right lender to achieve the your goals and take away daunting task of trying to find a lender that will lend you the money and also having a good understanding of what rates and lenders are most competitive at that given time.
We assist through the entire process from start to finish and beyond.