How to Obtain a Commercial Property Loan for Your Business

What Is A Commercial Property Loan and How Do I get One?

A commercial property loan or commercial mortgage is a commercial loan that can be used to purchase or refinance business property or land.

These loans can be used for a range of purposes such as buying machinery and equipment, hiring staff or purchasing commercial property.

In this guide we will cover how to take out a commercial mortgage, the costs involved and the deposit required to obtain one.

Commercial Mortgages Explained

An introduction to commercial mortgages or commercial loans. What they are used for and who can get one.

What is a commercial Mortgage?

A commercial mortgage is a loan that is secured against a business asset.

These are non residential properties such as commercial factories, buildings and other types of business premises such as:

Retail Stores

A commercial mortgage can be used for the refinance of a commercial property or the purchase of one.

They can also be used to purchase business assets that will be leased which is called a buy to let property.

Commercial mortgage lenders take into account each specific borrowing situation when assessing the criteria for a commercial loan.

This means there is incredible variety in the type scenarios that are funded with this type of financial product.

The process of assessing a commercial mortgage is heavily reliant on a significant amount of unstructured financial data and is not an automated process.

Who can get a commercial property loan?

While anyone can technically get a commercial mortgage you will need to provide a security.

This must be large enough to cover the debt of the loan.

Residential property or commercial property can be used as a security.

Lenders will also require a general security agreement (GSA) of the property and your business assets.

There are scenarios where a GSA is not required and can be waved but you will need a very high deposit.

If you are required to have proof of directors income then you will be required to have a directors guarantee.

Lenders have specific legislation when providing commercial property loans.

This means that lenders do not have to prove that the borrower can service the loan.

This has resulted in 5 ways for the lender to review a commercial loan application.

These include:

Full Doc
Lease Doc
Low Doc
No Doc

What do lenders look at when assessing a commercial property loan?

Profit generating appeal of the assets that will used as collateral as part of the mortgage.

These include things such as the location of the property.

This is because of the zoning related to the location and the use of the property being commercial in nature.

What are the features of a commercial property loan?

Full Doc
Loan terms up to 15 years
Interest only for up to 5 years
A mix of fixed and variable interest rates
Additional repayments
Offset accounts
Line of credit
Capitalised interest

Lenders will have a speciality and will service that particular market.

Lenders also have specific products and pricing for these commercial mortgage products so it is best to compare lenders before selecting one.

Can I stay with the same lender for commercial property loans?

Yes, but the real question is should you stay with you current lender.

Once again this will be scenario specific.

If you have existing loans with your current lender as well as business banking then staying might be the simplest option.

You can look to get a better rate when you refinance with the same lender and get additional bonuses on the loan features.

Alternatively refinancing all the loans with a new lender lets you shop the deal around and get a better rate.

The two points here is that you will need to move your business banking over to the new lender as well as that will be part of the lenders conditions.

Choosing the right lender

How do I get a commercial loan approved?

As mentioned above each lender will have a specific process that you will need to comply with. This will require specific documentation and assets as security.

Working with a broker or marketplace is often a good place to start as it will give you a rough idea on the options available.

Choosing the right lender

As a business or commercial entity it is a good idea to try to align you business needs with a lender that has a track record of providing loans to industries that are similar to yours.

Looking for a property secured loans for your business? We have a range of different options to help you more your business forward.