A commercial finance is quite different from taking out a standard home loan. Since most commercial property loans are unregulated, the pricing of the property and several other loan terms can be negotiated.
To make it easier for you, we’ve put together a comprehensive list of resources to help you understand how a commercial loan works and how you can invest in commercial property.
Calculators for commercial finance
- How much can I borrow: This calculator gives you an accurate figure and exactly matches the methods used by several lenders. It also takes negative gearing into account which only increases the accuracy of the results.
- LMI calculator: Each lender has their own set of LMI premium rates depending on the nature of your application. However, our LMI calculator is updated regularly to provide you with a close-to-accurate quote.
- Credit score calculator: This calculator uses a similar method to that used by the banks and mortgage insurers to assess mortgages. This is an excellent guide to help you understand why your application can be declined.
- Negative gearing calculator: Get an estimation of the profit or loss you make from your investment by using this calculator. You can also use this to work out your tax refunds from negative gearing.
- Postcode guide: This calculator can help you work out whether the location of your property is considered as high risk by the lenders.
- More calculators: Our mortgage calculators are updated on a regular basis so that you can get a more accurate result than any other calculators online.
Basic concepts of commercial loans
- Commercial loan interest rates: What are the best commercial loan rates on offer?
- Commercial loan features: Find out which loan product and feature is right for you and what rates you should be paying for your commercial finance.
- How is LVR calculated?: There is a large emphasis on the LVR when lenders assess your loan application for a commercial finance. The lower the LVR, the lower the risk it poses to the bank.
- What are genuine savings?: While many Australian banks have a mandatory genuine savings requirement, each lender has different genuine savings requirements depending on the amount that you borrow.
- What is LMI?: LMI is only applicable if your loan poses a high risk to the banks. Generally, lenders charge LMI when you borrow more than 80% of the property value. However, if you’re taking out a low doc loan then they charge LMI if you exceed 60%.
- What is credit scoring?: Your credit score is an automated assessment of how risky your application is to the credit provider. Find out what is included and how it is calculated.
- Free bank valuations: To make things easier, we can order a valuation of your property with some banks before you even submit your loan application.
Advanced commercial loans
- Commercial property loan: Unlike standard home loans, commercial loan rates and prices depend on a lot of factors.
- Backpacker accommodation commercial loan: Successful investment of a backpacker accommodation comes down to the location of the property and proper management of the facility.
- Bad credit commercial loan: Some specialist lenders can look past your credit file and assess you on your merits rather than a set of guidelines.
- Commercial development loan: Banks have strict requirements when approving this type of loan, especially because it’s a tough sector to be successful in.
- Factory loan: There are still commercial investment opportunities in buying a factory, which is you may be able to finance the purchase as long as you can provide a strong case.
- Lease doc commercial loan: This type of commercial loan allows you to secure a loan with only the strength of the rent income from the property. This means that you don’t need full evidence of your income to get approval.
- Low doc commercial loan: Low doc commercial loans are specially designed for self-employed borrowers and professional investors. You can avoid the paperwork that banks normally require and even qualify for a competitive interest rate.
- No doc commercial loan: Some lenders allow you to buy or refinance a commercial property without any income evidence.
- More commercial loan types: From financing a restaurant to buying a warehouse, find out what other types of commercial loans you can qualify for.
Documents and templates
- Accountant’s letter: Your bank may ask you for a letter from your accountant to confirm the particulars of your situation. You can use these templates to make sure the letter is accepted.
- Employment letter: Some lenders require a letter from your employer to confirm your employment status.
- Rental income letter: You may need to confirm your rental income with a letter from your property manager.
- Statements and transaction history: Find out how a statement and a transaction history are different.
- Statutory declaration: Some lenders will require a stat dec to confirm a particular piece of information. Typically, these information cannot be verified by other means.
- Discharge form: If you’re planning to sell your property or refinance your mortgage, you will need to notify your current lender about discharging the loan they hold. This is also known as Discharge Authority Form or Release of Security Form.
How can I qualify for low interest rates?
Depending on where they obtain the funds they lend out, lenders have different cost of funds for commercial finance. This means that the lenders with the lower risk will, of course, have lower interest rates.
Most lenders have a risk matrix used to price larger commercial loans. This matrix is quite different from a smaller commercial finance, where the size of the loan is considered the main determiner of the interest rate and fees.
The risk matrix for a bigger commercial finance generally includes:
- Location of the security property.
- Diversification of the property portfolio.
- Condition and appeal of the security property.
- Current and future state of the local property market.
- Level of interest cover (ability to repay the debt).
- Loan to Value Ratio (LVR).
- Length of time until the lease(s) expire.
- Strength of the tenant(s).
- Asset position of the borrower.
- Management experience / track record.
Want to know if you qualify for a low interest rate?
Call us on 1300 889 743 or fill in our free online assessment form and speak with one of our mortgage brokers who specialise in commercial property loans.
Do annual reviews matter?
An annual review may be required where the risk to the bank may change each year. However, lenders rarely need to conduct a review for smaller commercial property investment.
Generally, lenders will conduct an annual review if:
- The commercial finance is for more than $2 million.
- The property is an unsecured facility.
- The security property is a specialised property.
- The LVR is high or if it’s an interest only loan.
- You’re struggling with your repayments.
Typically, lenders require you to provide a profit and loss, balance sheet and cash flow forecast. They may even require a complete revaluation of your security property.
Be aware that the bank may use this as an opportunity to label your commercial property as a higher risk and change the margin on your loan.
What does a commercial broker offer?
First, we’ll speak to you about your business direction and will determine whether we’re a good fit for you.
Once this has been made clear and you’ve sent us the required documents, we’ll start negotiations with a lender that is likely to approve your situation with favourable terms and at a competitive interest rate.
When we’ve found a suitable lender, we’ll provide you with an Indicative Funding Proposal (IFP) to confirm the suggested conditions of the loan. A valuation will be arranged and a full loan application will be submitted to the lender after you accept the proposal.
During the process, we make sure that the advice from your solicitor and accountant are taken into account so that you get the best result possible.