Commercial lending differs from home loans in many ways. However, one of the common factors between these two types of loans is that the loan amount is determined by the total value of the property you intend to buy. For instance, if you’re buying property worth one million dollars, you are only required to come up with a 20% upfront payment and cover the rest of the 80% of its cost with financing.
These numbers can vary according to different lenders. While certain banks can ask you for much higher deposits, you should generally be able to close deals worth under a million dollars with up to 20% as upfront payment. In contrast, property that costs over one million dollars will require you to come up with a considerably larger deposit amount that ranges from 25%-40% of the project’s total cost.
Like in many other countries, Australian banks and lenders consider commercial property loans to be higher-risk investments compared to residential property loans. Also, commercial properties have higher prices and better yields, which means you will need to invest a considerably larger amount of money upfront.
Commercial Property Loans in Australia
Banks would normally consider any property other than the standard home or a building that can be used for business purposes as commercial property. For instance, any building that could serve as a warehouse, restaurant, shop, medical centre, etc., will fall under the commercial property category.
As we mentioned earlier, banks consider commercial properties as riskier than other types of properties. Hence, getting approval for commercial property loans can sometimes be a tedious process.
In Australia, where the population isn’t very large, a bank or a property seller could easily find buyers for a residential property. However, they might find it more difficult to sell a large commercial warehouse. Therefore, there are mandates that require you to make larger deposits along with a myriad of stringent lending regulations.
How Can a Broker Help You Secure a Commercial Property Loan
Before getting a commercial property loan, it is important to do research and consider all your options. By using the services of an expert loan broker, you will be able to examine diverse options to help you identify a loan service that is best suited to your needs.
Essentially, a loan broker’s job is to help you find the best lender and also facilitate the business loan application process. In addition, brokers have specialized knowledge of and access to various loan products.
Importantly, loan brokers have insider knowledge of various lending products and can also gain access to information that may not be officially listed on the lender’s website. Furthermore, they are well versed in various lenders’ approval criteria, which can make your search process significantly more efficient. All in all, you should consider having a consultation with a business loan broker to find the best loan deal without having to spend the time and the effort searching for it yourself.
While there are several similarities between commercial and residential property loans, you will need to prepare your application meticulously to get your commercial loan to the approval stage. Also, due to market fluctuations and population concerns, commercial loan processes in Australia undergo heavy scrutiny.
Unlike banks, loan brokers can stay unbiased as they operate independently of any corporate guidelines. Also, they will have a plethora of options for you to browse through and see what will work best for your requirements. In short, an experienced commercial loan broker can guide you through the complexities of commercial loaning and help you make the best financial decisions for you and your business.