Thousands of small business owners and new entrepreneurs who want to buy their own office space rely on commercial property loans. Purchasing a commercial property in the hotspots of Brisbane is a dream of every business owner.
However, securing a commercial real estate loan in Brisbane is not as easy as you think.
Since this type of loans comes with their own set of rules and factors, make sure you do thorough research before making any final decision. Before investing a commercial property in Brisbane, you can consider the following tips to secure a commercial property loan.
1. How Much You Need to Borrow?
While home loan lenders will allow some buyers to borrow more than 90 % of a property’s purchase value, the commercial loan market is entirely different. You will need to pay more cash as a down payment.
For example: If you want small commercial property loan of up to $1 million, then you can borrow about 80 % of the property’s value.
The security held by the lender generally determines the amount you borrow. So, make sure you borrow the fund for a secured commercial property.
2. Type of Security
When it comes to commercial lending, the security should be a commercially zoned factory or commercial building. Some other commercial properties include:
- Shopping Centres
- Factories
- Warehouses
- Shops
- Land Subdivisions
- Block of Strata units
- Block of Flats
The banks look at specialised office properties as security.
3. Different Types of Commercial Lending
One of the biggest differences between home lending and commercial lending is that the latter is not regulated by the
National Consumer Credit Protection Act.
In simple words, you don’t have the same consumer protections as home lending. The type of commercial loan purpose will affect how the lender will assess and price your loan.
Investment
It involves the lowest risk because you buy or refinance a commercial building that is held for rental purposes.
Own Occupied
It is considered a medium risk because you buy or refinance the office space to run your business.
Working Capital
Most lenders find this type of commercial lending involves the highest risk. You use working capital to run your day-to-day business operations.
Tip: The purpose of commercial lending should be determined before applying for the loan. If you are a
young property investor, it is better to do your thorough research before applying for the commercial property loan.
4. Shorter Commercial Loan Period
Believe it or not, smaller commercial property loans are paid off over shorter timeframes as compared to home loans.
For example: for $1 million commercial space, you can get around 15- year or a 20-year term.
5. Pricing May Vary
Commercial property loan pricing may vary depending on the security, location, the gearing level and the nature of your business. The assessment is entirely different from a home loan. It is based on the interest cover- which looks at the surplus income once you have paid all your other expenses as compared to the debt repayments for the commercial loan.
6. Be Ready to Pay Higher Interest Rates
You will need to pay a higher interest rate for a commercial property loan in Brisbane, Queensland, particularly if your property or business is considered riskier than other business operations.
However, the interest rates for commercial loans vary based on the type of property purchased. It all depends on the risk associated with the property. The greater down payment you pay, the lower will be your interest rate.
7. Determine the Type of commercial loans
The types of commercial loans include commercial property, mezzanine finance, business loans, development finance, equipment and car leasing, and business banking products.
A Full doc loan is for those who can show two years financials while low doc loans are for those who can prove payments either via bank statements or an accountant's letter.
Conclusion
If you are investing in commercial property in Brisbane for the first time, then make sure you secure a commercial property loan. This can be a challenging process than the residential market. While applying for a commercial property loan, lending institutes or banks will assess everything and take more time before lending you the money.
If you are planning to move your office in Brisbane, take help of
reliable removalists in Brisbane for packing and moving task, as you need to handle important documentation for securing the loan. However, the tips mentioned above will help you in securing a commercial real estate loan in Brisbane. Consider all the tips carefully before applying for it.
