What can commercial finance be used for?
If you are looking for office space or any other type of commercial premises, then commercial finance can be a suitable option. Mortgage House can help you find a home for your business, whether you’re a one-man-or-woman band, or a CEO looking to find space for your 100-person operation. Commercial finance can help you pounce on that perfect location when it becomes available. A Mortgage House commercial loan can give you a strategic advantage, supplying you with the knowledge that a shortage of funds won’t stop the growth plans of your business. Mortgage House commercial finance options can help you with:
- Property investment. Investing in commercial property can be attractive, especially if there is a shortage in a particular city, suburb or town. Commercial leases can be long-term, helping with your long-term financial stability.
- Owner-occupied premises. If you own a business, then commercial finance can help you expand and take advantage of any urgent opportunities that arise.
- Refinancing. Whether it’s a home mortgage, a business loan, or commercial finance, having a financial health check every now and again can be good practice. Refinancing may help you find a better commercial loan, with more relevant features, lower interest rates and smaller repayments. That can save your business thousands over the life of the loan.
What are the pros and cons of commercial finance?
Like all mortgages, there are potential benefits and potential risks. At Mortgage House, we work hard with a sole focus of finding you suitable products and services, tailored to your exact needs. That is especially important when dealing with commercial finance. Each business is different and faces different challenges and opportunities. It is important that banks and lenders understand the intricacies of each business and each industry. That can help mitigate risk and can also ensure you find a suitable product that can benefit your business and help with its growth. Contact our lending specialists to discuss your needs and how we can help. In the meantime, it can be important to understand the following about commercial finance loans.
- Increase your capital. Owning your own commercial premises gives your business a capital asset that can help your balance sheet. It can also help with future finance applications.
- Equity. Whether you’re a business, commercial or residential property owner, building up equity can be a big advantage. As a commercial premises owner, it can help you with commercial and business loan applications in the future.
- Longer leases. If you are borrowing money for a commercial investment, and you have a tenant, then that can be a big advantage. Commercial leases are usually long-term and can give you financial stability to make further investment decisions.
- Cost. Buying commercial property can be more expensive than residential property and maintaining or upgrading can also be costly.
- Vacancy. Commercial premises can have long vacancy rates. If you’re investing in commercial property, it is important to take this into consideration.
- Tax. Buying a commercial property can attract GST and can be subject to Capital Gains Tax (CGT) when sold.
- Business risk. It’s also important to understand that if a commercial loan has defaulted then it will be listed on the company’s credit report.
What other loans can help my business?
Commercial loans aren’t the only option Mortgage House can offer you to help your business grow. We know the importance of actively listening to our customers’ needs, not what we think their needs may be. That is a key part of our lending specialists identifying suitable loan and mortgage finance products and options for each customer. Providing ongoing support throughout the life of the loan is just as important for commercial loans as it is for regular home mortgages, and our specialist technology ensures a simple and seamless process, no matter the size of the business or property. As well as providing you with a range of tools, knowledge and experience, Mortgage House can also provide your business with a range of other finance options, including:
- Business Loans. The day-to-day operation of a business, big or small, isn’t easy. A business loan can be suitable if you need urgent finance, for something as small as a coffee machine or as big as an expansion opportunity. Business loans can even help you get started.
- Line of credit. A line of credit can help you with urgent cash flow and can be a great way to keep things moving while waiting for invoices to be paid.
- Investor loans. If you’re looking to purchase a commercial property, investing in more real estate can add to your portfolio.
- Interest only. Interest-only loans can help free up cash flow and increase your range of property investment.
What will my repayments be?
If you have an idea of how much your loan will be, and the interest rates you will be charged, you can get an indication of how much your repayments will be. Our Mortgage Repayment Calculator lays it all out for you in an easy-to-understand format, making budgeting transparent. You will also discover how much interest you are likely to pay over the life of the loan. The calculator will also let you see the difference in interest charged over the life of the loan if you make additional repayments. If your business is having an unexpected boom, then making additional repayments to a commercial loan can save you thousands over the life of your loan. Reducing debt can also have long-term benefits for your balance sheet and for your business overall.
Important Disclaimer: This is intended as a guide only. Details of terms and conditions, interest rates, fees and charges are available upon application. Mortgage House’s prevailing credit criteria apply. Please note that your actual fortnightly repayment would be equal to the monthly repayment amount divided by two. Weekly repayments would equal the monthly repayment amount divided by four. If you choose to pay fortnightly or weekly, your actual repayments will be higher than repayments shown on this page. You can reduce the term of your loan if you choose to make repayments fortnightly or weekly. We recommend you seek independent legal and financial advice before proceeding with any loan.
How do I apply for a commercial loan?
When you’re applying for a commercial loan, it is important to have a clear picture of your business finances and ensure they are in the best position to seek finance. As www.business.gov.au points out, there are a few things to consider before applying, to give your application the best chance of success. These include:
- Business plan. Make sure your business plan is up to date, and you have all the supporting documents attached or in an easy-to-reach place. Make sure your business plan is clear and concise.
- Know your figures. Banks and lenders will need to know all the key financial figures for your company, so make sure you have them available. This is important whether you prepare them or have a financial expert help you. Figures such as up-to-date income, expenses and future projections, as well as net profit information, are always worthwhile.
- Don’t fake it. If you don’t think you are comfortable answering financial questions, bring along an accountant or business advisor, someone who can do it for you, accurately.
With that in mind, it is always important to know your limitations when speaking with our lending specialists. You know your business and what you want but knowing your finance limits can be just as vital. That’s where an understanding of your ability to repay borrowed money is crucial. Before you apply for a commercial loan, ask yourself these questions.
- Do you need the money up-front or on a needs basis?
- What is the maximum repayment you can afford?
- What is your Loan-To-Value Ratio (LVR)? (see below)
- If you need collateral, what assets do you have to offer?
- If you need a guarantor, who will be willing to guarantee your loan?
- How much equity do you have?
- What is the maximum percentage share of your business you are willing to offer investors?
So Mortgage House can help you find a suitable commercial loan, our lending specialists will take you through these questions, and a few more. It is important Mortgage House understands your full financial situation to help you achieve your property goals.
What is Loan-To-Value Ratio (LVR)?
LVR is the percentage amount you are borrowing, compared to the value of the property you want to buy. It is usually determined by the loan details, and how much deposit you have available. If your property is bought at $1 million and you have put a deposit down of $200,000, your LVR is 80% – you’ve put down a 20% deposit and have borrowed 80% of the total value of the property. Your LVR can reduce as you pay off the loan. If you have saved up a deposit, then you can determine how much you can afford to spend on buying your commercial property.
What kinds of loans are available?
Most banks and lenders offer two different kinds of loans. Both have their advantages and risks, and, depending on the health or your business, both may be an option for your commercial loan.
- Principal and Interest. A Principal and Interest loan means your repayments from the start are made up of both the principal amount and the interest charged. Our Mortgage Repayment Calculator is a good way to highlight how repayments can be made up of both, and when the majority of the interest will be charged. If you make additional repayments, the amount of interest you pay will reduce.
- Interest Only. Interest-only loans are just as they sound. Instead of paying back both the principal and interest amounts in your early repayments, the repayments are solely the interest amount. The length of time repayments remain interest-only is usually limited to less than 10 years, and repayments are often smaller. The aim of Interest-only loans is to sell the property within the agreed interest-only period and sell the property for a profit.