Commercial Loan Terms
You may not know this but commercial loan terms are highly negotiable depending on the strength of your application.
Loan terms vary depending on whether the loan is for a standard or purpose-built (specialised) commercial property.
However, there ways to get a longer loan term, free up your cash flow and increase your borrowing power for future business growth or to continue building your commercial real estate portfolio.
Commercial loan terms up to 30 years?
What loan terms are available?
Yes, it’s possible to get it depending on the purpose of the loan and the property used as a security. Here is a breakdown of the commercial loan terms available with our lenders:
- Commercial property with residential property as security: 30 year terms available.
- Interest only: Up to 5 years
- Standard commercial property (freehold): 10, 15, 20 and 25 year terms.
- Property and business (freehold going concern): 10, 15, 20 and 25 year terms.
- Purpose-built commercial property: Typically 10 to 15 years but some lenders offer up to 25 years as standard policy.
- Interest rate terms: Fixed, variable split rates available.
- Bank bill swap rates (BBSY): 10, 15, 20 and 25 year terms.
- Redraw: Allowed for amounts you’ve prepaid and only after the fixed period.
- Extra repayments: Unlimited and no fees applied after the fixed period.
- Banks will usually insist on principal and interest (P&I) for commercial loans under $ 1 million.
Call us on 1300 889 743 or complete our free assessment form so one of our mortgage brokers can qualify you with a lender that can offer you the best loan term based on your situation.
How can I get a longer term?
There are two ways to get a long commercial loan term:
- Buying a standard commercial property.
- Using a residential property as security.
With that, you can get a loan term of up to 30 years.
What if I’m borrowing at a high LVR?
Even if your Loan to Value Ratio (LVR) is high, you may still qualify for a 30 year loan term.
What if I don’t have a residential property?
Some lenders will still offer 25 year terms with an interest only period!
Will I get charged a higher interest rate?
No! You won’t be charged a higher interest rate for a loan term longer 10 or 15 years.
Why is a longer term better than a shorter term?
It may make more sense to get the shortest loan term possible so you can pay off the loan as quickly as you can but you’re also tying up your cash flow in the process.
Let’s say that you want to buy a freehold going concern so you can eventually have a commercial property as an asset.
The popular choice among commercial investors and business owners is to keep refinancing to an interest only throughout the term of the loan until the mortgage is paid off.
At that point, you can draw less money from the business because you don’t have a mortgage and you can start paying off the asset.
It essentially becomes a nest egg for the future because you can leverage the equity for future business expansion.
Not running a business?
Even you’re just buying a freehold property, getting a longer loan term increases your borrowing power so you can continue to qualify for commercial finance and buy more properties.
That’s because your fortnightly or monthly repayments are essentially smaller meaning you have less commitment and more cash flow to meet the bank’s serviceability requirements.
What are the benefits of a short term loan?
The benefits of a 10 to 15 year commercial loan term is that you’re obviously paying down the loan faster, allowing you to access more equity for investment and to refinance to a lower interest rate more often.
Of course, your monthly commitments are higher so your cash flow is tied in the commercial mortgage.
Let’s just say you want to buy commercial office space as an investment.
Your monthly repayment on a 15 year term might be $17,000. If the loan term was over 25 years, your repayments might be as low as $11,000 per month.
That gives you around $6,000 worth of cash flow to boost your borrowing power to get a business loan or equipment finance for your business or if you simply have plans to expand your commercial investment portfolio.
Interest only periods for 5 years are pretty common with banks so what you should be really thinking about is after the interest only period.
Are you going to have 10 years or 20 years to pay off the commercial loan?
Complete our free assessment form to speak with one of our mortgage brokers.
We can properly assess your situation to find a loan term that best meets your needs and will help you achieve your financial goals.
Commercial loan terms FAQs
Can I get a commercial loan without switching business banking?
If you have a business and you want a loan to buy your own commercial premises, you usually need to transfer your business banking to the new lender as part of the deal.
However, there are ways to avoid this requirement so please check out the ‘Commercial Loan Without Switching Banking‘ page to find out.
Should I prepay the interest?
Some commercial loan products allow for prepaid interest for up to 12 months, which can allow you qualify for great interest rate discounts.
You can actually claim a tax deduction for the interest you pay in advance but please speak to a financial professional if part of your investment strategy is tax-related.
What are the benefits of BBSY rates?
Bank bill loans can provide you with a potentially cheaper rate than the headline rates offered by banks and lenders.
Specifically, it’s a commercial rate linked to the bank’s cost of funds, otherwise known as the Bank Bill Swap Rate (BBSY).
As a general rule, the BBSY rate is about the same as the Reserve Bank of Australia (RBA) official cash rate.
The lender will then add a margin based on the overall risk of your application.
The interest rate is actually rolled every 30, 60, 90 and 180 days but the key to the BBSY rate is that it isn’t a fixed rate.
You can refinance back to a variable or a fixed rate any time you like!
You can also get the same standard commercial loan terms as if you were getting a fixed, variable or split rate commercial loan.
A bank bill commercial loan is more suitable for people borrower $2-5 million so give us a call on 1300 889 743 or fill in our online enquiry form and we can let you know if it’s the right commercial loan for you.
Do you need a commercial loan?
We have a number of senior mortgage brokers on our team that specialise in commercial property loans and we can provide guidance on what commercial loan terms will work best for you.
By properly assessing your situation, you’ll be able borrow at the maximum Loan to Value Ratio (LVR) based on your financial situation and we even negotiate significant commercial interest rate discounts that the banks don’t advertise!
Call us on 1300 889 743 or complete our free assessment form to speak with a mortgage broker.