If you need 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.
It all comes down to the nature of your situation, the type of property you want to buy and the lender you choose.
How to avoid it
Although most lenders require you to switch all of your business lending as part of the deal, there are some lenders that will allow you to continue your business banking with your current lender.
This is great news!
When you’re running a business, you always want to minimise the amount of disruption to your cash flow so you can keep focusing on your day to day operations and generate an income.
There are typically three ways to qualify for a commercial loan without switching banking:
- You’re borrowing against a residential or commercial property so there is no unsecured portion.
- You’re borrowing less than $1 million.
- You’re taking out a commercial loan with no annual reviews which means that your loan is for a non-specialised commercial property.
Please call us on 1300 889 743 or complete our free assessment form so we can help you choose a lender that doesn’t require you to switch your business banking.
How do I know if my property is specialised?
Banks prefer lending to commercial properties that have a wide market appeal.
That means commercial real estate that can (likely) be easily sold in the event of a forced sale due to you defaulting on your mortgage.
These types of a commercial properties include:
Non-standard or specialised properties include:
Not all lenders are the same!
Every bank has their own appetite and lending policies regarding the types of commercial properties they will consider lending against.
Policies also vary in relation to whether you need to switch all of your business banking over as part of the deal.
Depending on the nature of your property, you may have limited choice in the lenders that you can go with.
In this case, you may find that the lender makes it a requirement to switch all of your banking.
Speak with one of our specialist mortgage brokers before applying for a commercial property loan directly with your bank.
Why would you want to keep your business banking where it is?
It really depends on your situation and the nature of your business.
For example, you may be able to get a better deal by bundling all of your business finance requirements with the one bank.
So apart from avoiding disruptions to your business cash flow, it may be in your best interests to leave your business banking where it is and have your commercial loan with a lender that can offer you a sharp interest rate and strong commercial loan terms.
In fact, a 2015 study by business banking market researcher East & Partners found that around half of all small to medium-sized enterprises (SMEs) rely on their current bank for transactional banking needs rather than for their commercial loan needs.
These transactional banking needs include cash management, cross border payments and payment processing products.
So, in other words, 50% of business owners would rather maintain their existing business banking relationship instead of switching.
Why do banks want you to switch your business banking?
Banks are very risk-averse, particularly when it comes to specialised commercial properties and unusual locations.
If they see any reason that the property might have a limited number of buyers, they will either decline your application outright or try to minimise their level of risk.
Two of the ways they do this is by requiring you to come up with a larger deposit and applying a higher interest rate.
The third way is to bring your business banking and, potentially, your other loan facilities across.
In that way, the lender is generating more business from you as a customer and they’re hoping that you’ll stay with them for the long-term.
This is otherwise known as your “stickiness” as a client and it’s a tactic that lenders use a lot in business lending.
Speak with a specialist broker today
To speak with a mortgage broker about your business banking or commercial property loan needs, please call us on 1300 889 743 or complete our online enquiry form.
Let’s discuss your situation and help you find a solution!