Commercial Loans

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Break Free Home Loans are a leading commercial loans in Melbourne mortgage broker, with over 20 years of industry experience. We provide lending solutions and advice tailored to your needs. We work closely with clients as trusted advisors and are accessible to clients when needed.

Our brokers work hard at understanding our client’s unique circumstances and helping them overcome common home loan challenges. Whether you’re a first home buyer or an experienced investor, we’ll help you find the best home loan for your situation. Whether you’re self-employed and have trouble proving your income or you’re a contractor or casual worker, we offer solutions for all types of clients’ income sources.

If you’re looking to buy a commercial property, a commercial property loan may be a good option for you. There are a number of commercial property loans that you can apply for depending on your funding needs. Commercial loans are generally more expensive than residential property loans, but you’ll often get a higher return on your investment. Break Free Home Instant Loans can help you find the right commercial lender to get you the financing you need. Talk to a commercial loan broker today to assess your eligibility and begin your application.

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What Is A Commercial Loan

A commercial loan is a business loan you can use to finance the needs of your business. With a commercial property loan, you can purchase a commercial property. This loan may offer better commercial finance interest rates. The type of buildings you can purchase with commercial property finance includes office, retail and industrial spaces. Commercial real estate loans can be taken out by individuals, partnerships, trusts, and other groups on behalf of a business or company.

How It Works

Commercial property loans require regular repayments with interest and fees. Interest can be fixed or variable. Repayments are made throughout the loan term, which can go up to 30 years. There are fees such as establishment or even monthly and annual fees. With your regular repayments, it’s best to find a loan that offers you the flexibility of making principal and interest payments, or interest only payments when needed. This will help you if your turnover is seasonal and you’d like to lower your loan obligations at certain points of the financial year. You can also opt for split rate options, using fixed and variable rates during different periods to budget your repayments. Making additional repayments will also shorten your loan term and reduce the amount you pay in interest.

How Much You Can Borrow

Commercial loans offer large borrowing amounts. This ranges anywhere from $200,000 to $5 million AUD. You can negotiate with some commercial lenders to borrow even more. Aussie lenders will usually weigh each application on a case-by-case basis. Depending on your industry, business performance and credit history, you may be able to qualify above the standard commercial lending limit.

Requirements For Commercial Loans

Commercial investment loans generally have stricter lending requirements. This lending criterion will vary from lender to lender. You’ll have to meet certain requirements to be eligible for finance. These conditions include income and trading history, but may also involve:

Deposit

A deposit requirement is involved when buying commercial property. It is often higher than deposits needed to purchase residential properties. On a commercial mortgage, the maximum LVR you usually get would be around 60-70%. Some banks may offer loans up to 80%, but are usually harder to qualify for than online lenders. Compare this to the 90-95% LVR that are available from residential lenders.

This difference is due to how commercial properties present more risk to the lender, which results in a lower loan to value ratio. Where residential properties can cost as little as $50,000 AUD, commercial properties cost between $75,000-$100,000 AUD at the minimum. However, with this higher upfront cost, commercial properties do stand to gain higher rental returns and can be a better investment. In fact, high-quality commercial properties may be able to pay itself off in 10 years as opposed to the traditional 30 years needed for a residential property. It’s easier to leverage equity with commercial properties to purchase a second, or third investment property.

Afford Repayments

Commercial loans Melbourne finance is usually much more costly than residential finance. Interest rates are higher for commercial property loans and there are high ongoing fees associated as a cost of borrowing. You should evaluate the risks and benefits before taking out a commercial loan. More importantly, you need to make sure you’re getting flexible repayment options. For instance, if you can arrange for interest only repayments, you can adjust your payments to suit your cash flow. You also need to make sure you have enough funds to cover your deposit. You must have a regular income or revenue stream that can confidently meet the monthly payments plan. Assess your finances in accordance with your loan obligations. Check if you can meet your current and future payments with your budget.

Security Asset

The type of property you offer as security will have a large impact on the amount you can borrow. While some lenders may accept other assets such as inventory, machinery or invoices as collateral, you will qualify for a higher borrowing amount with standard commercial properties. They are an ideal security for your loan because they have a broader appeal for buyers. This is especially true if the premises are located in a good area and zoned appropriately for their use. Examples of standard commercial properties include:

Offices
Factories
Retail spaces
Warehouses
Residential properties such as multi units or blocks

You may also offer specialised commercial properties. However, lenders will need to perform a detailed valuation of a specialised property and assess its suitability and risks. Consequently, it’s likely you’ll qualify for a lower LVR with them. Specialised commercial properties include:

Restaurants and pubs
Hotels, motels, caravan parks and other accommodations
Childcare centres
Private schools
Farms
Shopping centres
Aged care facilities

Why Take A Commercial Finance In Melbourne

The following are some reasons why a business may choose to take out different types of commercial loans. This includes commercial construction loans, short-term commercial loans and other financing options available from commercial lending institutions.

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Buying New Equipment

A business may need to buy new equipment to expand its operations. For day-to-day productions, new machinery or plant equipment is a heavyweight asset that contributes directly to the bottom line. It is an extremely important need your business may require immediately. A way to purchase equipment without having to disrupt cash flow with the high initial investment is to get it on finance. This way, you can avoid having to pay for it upfront and spread the cost of your equipment purchase over a set period of time. You should research the piece of equipment you want and provide detailed information on its costs. This includes the initial investment, delivery, installation and assembly to get it integrated into your business.

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Securing Extra Capital

Your working capital can include marketing, real estate, staff commitments and other expenses you need in order to run your business. This can be any costs associated with the day-to-day operations, or venture capital for a business expansion. You can provide a detailed business plan to lenders to qualify for their loan and ensure them of your future plans with the funding.

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Buying Commercial Property

Perhaps you’re in the market for real estate. You’ve spotted a golden opportunity to buy a new commercial property be it a warehouse, retail premise, office space or to buy out a competitor. To secure the property you want you have to purchase it outright but maybe you don’t have the necessary cash on hand. This is where a commercial property loan comes in handy. You can make repayments over the life of the loan while acquiring the property immediately.

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Renovating Existing Property

Perhaps your retail space is in need of a major makeover, or perhaps your production house needs to be upgraded to satisfy functional requirements. When you need an existing commercial property overhauled, a commercial loan can help you undertake the renovation you need.

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Other

Your business may be having cash flow problems and you need immediate financial assistance to cover the shortage. Some companies rely on short term commercial loans just to stay in business. A loan can help recover a loss in profits and meet the needs of ongoing expenses until you get back on your feet.

How To Apply For The Loan

The following is a step-by-step guide on how to apply for your commercial loan:

Choose The Right Lender

Make sure your lender is legitimate and accredited with the ASIC. Compare loan products from different lenders. This includes calculating the interest rates, fees and charges. Make sure you’re getting the maximum LVR as this determines the deposit you need to pay. You should also negotiate when it comes to borrowing amounts, loan terms, and repayment flexibility to suit your needs.

Prepare Documentation

Depending on the lender, type of property you’re buying and the amount you’re borrowing, the documentation you’ll need to apply will vary. Generally you need to provide:

Personal and company information such as contact details, proof of address and identity documents as well as your ABN/ACN.
Financial details to show your assets and liabilities, including your deposit. You need to supply cash flow statements so your lender can assess your ability to meet repayments.
Property details such as its location and features. Lenders will perform a professional valuation to determine how much the property is worth. You need to provide details of your lease agreement and the type of tenants currently residing on the property.

Apply

You can submit your application. You may be asked to provide additional information on your business experience. Applying with a mortgage broker will help you prepare an application that addresses the lending requirements and give you the best chance of approval.

Receive Finance

Once your loan is approved, you’ll receive your funds as a lump sum in your nominated bank account. You can use the finances as you wish. Always make sure to make your loan repayments on time so you don’t damage your credit.

Commercial Loan VS Regular Loan

Many clients ask, how does a commercial loan differ from a regular personal or residential loan? Commercial property loans are deemed more risky to lenders than residential property loans. As a result, there are key differences between commercial and residential property loans.

Higher interest rates: You can expect higher interest rates for a commercial loan due to the higher risk of vacancy.
Lower maximum LVRs: You may borrow up to 90% or even 95% of the property value with residential loans. With commercial loans, lenders offer a maximum of 70% of the property value. This means you need to pay a larger deposit to qualify for the loan.
Higher fees: Commercial loans have establishment and ongoing fees, as well as other fees such as valuation fees. These add to the total cost of the loan.

What Do You Need To Know About Commercial Property Finance?

You have to go through every detail of your loan agreement carefully. Being aware of your rights and obligations will help you make the best decision when it comes to finding finance. These are some things you need to consider when choosing a commercial loan:

Rates

Choosing between a fixed and variable interest rate will affect your monthly payment amounts and the total cost of the loan. You can also opt for a split rate option if you want to have certainty in some periods and take advantage of market fluctuations in others. Make sure you can afford your repayments with your business’ ongoing expenses and income. Calculate your APR to find out if your loan is competitive and see if your payments fit your budget.

Fees

You need to account for application fees, account keeping fees and other fees for additional repayments or to access the loan’s redraw facilities. These fees will vary between lenders and add to the cost of your loan.

Other Terms

Check your loan terms and conditions. Shorter loan terms will demand higher monthly repayments but less interest. While longer terms mean low payments but being charged more in interest and fees. Look at your repayment flexibility. You may need to adjust this to the seasonality of your cash flow. You should also see if you can make additional repayments without incurring penalties. You may be able to lessen the cost of your loan this way.

Contact Us

Talk to experienced brokers from Break Free Home Loans. We can help you apply for your commercial loan, making this process stress-free and seamless. We understand what it takes to build a strong case for your loan approval no matter your business’ financial situation.

Frequently Asked Questions

The following are some of our most frequently asked questions:

How To Get A Commercial Loan In Melbourne?

Getting advice from a mortgage broker or financial advisor goes a long way. Consult experts to gain the most value for your money.
Pick a suitable property with a title. Check the applicable zoning laws and development plans.
Compare loans from different lenders. Assess their interest rates, fees, repayment terms and eligibility criteria. Some lenders may give you the opportunity to prequalify for their loan. They may perform valuations on your investment property to see its worth.
Submit your application to the lender with your supporting documents.
Receive financing and begin making your loan repayments. Make sure you stay ahead of your repayment schedule so you won’t be charged penalty fees or damage your credit score.

What Rates For Commercial Property Loans Should I Expect In Melbourne?

The interest rates of commercial property loans are not as widely publicised by lenders compared to residential home loans. This is because various factors affect the rate of your commercial property loan, such as:

The property’s location
The performance of the current property market
The location of the property used as security for the loan
Your financial situation and ability to repay the loan
The LVR which is the size of the deposit you saved
The length of time remaining in the lease and the type of tenants in the property
Your company’s assets and liabilities
Your experience as a commercial property owner

The lender’s own unique lending policies will also affect the interest rates they offer borrowers. It also depends on the type of commercial property finance you’re applying for.

What Is The Difference Between A Commercial Loan And A Regular Loan?

The differences between a commercial loan and a regular loan are as follows:

Commercial loans have higher interest rates than regular loans due to a commercial’s property rate of vacancy.
Commercial loans have lower maximum LVRs compared to residential loans. Residential borrowers can borrow up to 90%, sometimes 95% of the property value. Meanwhile, commercial borrowers can only obtain a maximum of 70% of the property value. They must put down a larger deposit to qualify for the loan.
Commercial loans have higher fees. This includes establishment and ongoing fees, valuation fees and any charges that can add to the total cost of the loan.

Contact our team

We love to hear from each and every one of you. Please feel free to reach out to us today!

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1800 300 777

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info@breakfreehomeloans.com.au