Commercial loan with low documentation requirements

Share your concerns & ideas about commercial property loans in Australia.
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Simon_Baker
Posts: 37
Joined: Mon Jul 15, 2013 1:09 pm

Commercial loan with low documentation requirements

Post by Simon_Baker »

Hi everyone,

I am a professional trainer and I travel all over Australia for my job. I want to set up a new office and there is this property in Sydney that would be suitable for me. Due to the nature of my job, I do not have all the evidence of my income, which is roughly $80,000 per annum.

However, I am worried that I may miss out on the property if I spend time arranging the required documents. Is there any way that I can get a loan in this situation? Could anyone tell me how much may I be able to borrow?

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Otto Dargan
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Re: Commercial loan with low documentation requirements

Post by Otto Dargan »

Hi Simon_Baker, welcome to the forum.

It may be possible for you to get a low doc commercial loan to buy a property even if you do not have all the documents required by standard lenders. You may be able to borrow up to 80% of the purchase price, or up to 65% with a discounted interest rate when you are buying a commercial property. It is possible for you to borrow up to 80% of the value of properties that you own.

If you are refinancing a property then you may be able to borrow up to 80% of the property value, and up to 100% of the value of residential properties that you own.

Although you may not need your tax returns or financial statements, lenders still ask for some evidence of your income. Generally, you will need an Australian Business Number (ABN) and need to sign an income declaration firm. You may be asked to provide additional documents such as:
  • A letter from your accountant.
  • Business Activity Statements (BAS).
  • Bank account statements.
  • Your rental history.
  • A copy of commercial lease agreement.
You may be able to borrow more and pay a lower interest rate if you can provide profit forecasts and interim financial statements.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Simon_Baker
Posts: 37
Joined: Mon Jul 15, 2013 1:09 pm

Re: Commercial loan with low documentation requirements

Post by Simon_Baker »

Hi Otto,

Thank you for the information. It would of course be better if I am able to borrow more at a reduced interest rate! Could you tell me how it would be possible with forecasts and interim financials?

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Otto Dargan
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Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Commercial loan with low documentation requirements

Post by Otto Dargan »

Hi Simon_Baker,

If you are able to provide profit forecasts then some lenders may consider your loan to be a full doc loan, thereby enabling you to borrow more at a lower interest rate. The forecasts project past business growth and increase in turnover and detail how they would continue after moving your business to new premises.

If your income from previous years was lower than your current income then you can provide interim financial statements or at least six months to build a stronger case to the lenders. It may also be possible for you to pre-pay interest to add strength to your loan application. For this you need a large deposit that can cover the interest for an entire year in advance.

If you need more information regarding your loan application then you can surf through our website. Alternatively, you can call us directly on 1300 889 743 or fill out our free assessment form.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Simon_Baker
Posts: 37
Joined: Mon Jul 15, 2013 1:09 pm

Re: Commercial loan with low documentation requirements

Post by Simon_Baker »

Thank you for the clarification, Otto. I will call you guys soon in order to discuss my application. Cheers!

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mochiXmochi
Posts: 40
Joined: Tue Aug 10, 2010 1:59 pm

Re: Commercial loan with low documentation requirements

Post by mochiXmochi »

Hi everyone! I also want to buy a commercial property and stumbled upon this thread. However, I am confused about low doc loan and full doc loan. What do they really mean and how do they affect the interest rate that I will pay?

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Otto Dargan
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Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Commercial loan with low documentation requirements

Post by Otto Dargan »

Hi mochiXmochi,

Loans can be classified according to the documentation provided as evidence of your income. Following are the main types of commercial loans according to this classification:
  • Full doc loan: This type of loan requires you to provide full evidence of your income. This usually means that you will need to provide your payslips or tax returns from the last two years depending on whether you are a an employee or self-employed.
  • Low doc loan: This type of loan is usually taken out by self-employed people who cannot provide full evidence of income such as tax returns or financial statements. Also called low documentation loan, this type of loan has a higher interest rate than a full doc loan.
  • Lease doc loan: Investors may be able to use a copy of the lease contract on the commercial property to prove the affordability of the loan if the rental income is higher than the interest. This type of loan is similar to a low doc loan.
  • No doc loan: if a borrower has no evidence of income then they may be able to get a low doc loan. As this type of loan has a much higher interest rate, it is generally used as the last resort.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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mochiXmochi
Posts: 40
Joined: Tue Aug 10, 2010 1:59 pm

Re: Commercial loan with low documentation requirements

Post by mochiXmochi »

Thank you for the explanation. This thread has really been much informative to me.

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