A Complete Guide to Commercial Property Loans

Business expansion requires new space and investment of a good amount of money. Banks and other money lenders now offer different loan schemes for the same; one such scheme is the commercial property loans. This loan scheme is available to all the business owners and self-employed individuals who are looking for business expansion by buying or taking leasing the office space or clinic or outlet. This loan amount can also be used for business place renovation and expansion.

Commercial Property Loans

What is a Commercial Property Loan?

As evident from the name, this loan is used to finance commercial property. You can use this loan amount for buying a new property or taking it on lease. A commercial property loan is a specific type of business loan. When compared to a residential loan, then this loan is different. Commercial property loans have a higher risk and bigger rates of interest to pay. Hence you must wisely assess the need and then apply for the same.

Planning to buy commercial property can be an expensive deal. Besides, these properties also witness higher vacancy rates and higher risk; hence, proper assessment is a must before going for commercial property loans.

Different between Commercial Property Loans and residential Property Loans

We have already highlighted a few pointers about how commercial property loans differ from residential loans, here is a quick overview of other parameters that differs in the two types of loan:

How are commercial property loans different from residential Property Loans?

• Internets rates: one of the first differentiating factors is that commercial property loans come at a higher interest rate.
• Lower maximum LVR: Well, when it comes to LVR, then in case of commercial property loan, it is merely up to 70%, but when it comes to residential loans, then this amount rises up to 95% LVR.
• Higher fees: Check the upfront fees asked by the two types of loans. Usually, for commercial property, it is on a higher side.
• Risk: As we have already mentioned, the commercial property loans are riskier as compared to a residential loan.

Key points to consider before applying for Commercial Property Loans:

If you have decided to go ahead with commercial property loans, then you will get a wide range of lenders available in the market. Many of them will offer lucrative deals, but it is always advisable to assess them on the following parameters and then make a decision:

• Interest rates: This may vary from bank to bank. Although the difference would not be that drastic, even a .5% difference on a higher loan amount can impact the EMIs and will save you from paying extra money in the long run. Scour through the internet and find out the best lenders in the market. Compare their interest rates and then decide which one is right for you.
• Fees: Many banks and money lenders charge some fees which may be the administration charges, application fees or other fees. It's best to enquire about the same in advance sp that you don’t end up paying the bank for every service that you avail from them.
• Loan Repayment Tenure: This is another factor that impacts the EMI and ultimately your budget. Make sure that you ask the bank about the repayment tenure before taking a final call.

Commercial Property Loans

Conclusion: From the above-mentioned information, you would have got a clear insight into commercial property loans. Business planning and expansion is a must for growth, and good funding ensures to achieve the same seamlessly. So, take a loan from a reliable financial body and secure your business position in the competitive market.