Your Commercial Property Loan – Being Prepared the Key to Success.

Your Commercial Property Loan – Being Prepared the Key to Success.

Purchasing a commercial property is a big step. Whether you are using it for your own business operations or are purchasing to diversify your investment portfolio, there are a few things to keep in mind. It isn’t very often we see purchasers with the funds to complete the purchase outright, most of the clients we see have the deposit ready to go and require private funding to meet a short settlement time-frame, or in order to complete the sale in anticipation of refinancing to a mainstream lender in the near future.

You may think that a property loan is a property loan regardless of whether it is residential or commercial, but there are a few key differences. We’ve put together a list of things to think about when going through the process of obtaining a loan for the purchase of a commercial property. Please feel free to give us a call if you need a hand structuring your loan application, we’re only too happy to assist.

Prepare your documents beforehand

Getting the basics right is step number one. Make sure you have up to date tax returns, copies of leases, bank statements and current financials. It can also be helpful to have a business plan that outlines why you want to purchase that specific property, and research you have completed about its potential uses, tenants and future planning considerations.

Review your credit report

You are entitled to one free credit report per year. Personally, I request mine at the same time I am preparing our tax information to go to the Accountant each year. Gets all the financial ‘stuff’ taken care of in one fell swoop. You can order your free credit report from Equifax, Illion or Experion, it can take up to 10 days to come through so be prepared for a short wait.

Although a commercial property loan is different from the mortgage you took for your home, lenders will still take a look at your personal credit report to help them make a decision. Generally, lenders will look favourably on a credit report that is free from declines, overdrawn accounts and defaults. (If you are in the market for purchasing a commercial property but have a credit report with declines, overdraws and defaults on it, contact us, we have funders who specialise in this area and may be able to assist).

Work with a Broker – oh, that’s us!

“Commercial property loans are notorious for taking a few months to complete”. Hmmmm, not generally in our world. This one took 4 weeks to source approvals for 3 separate loans, this one took 2 weeks, this one took one week from approval to settlement, and this one took three (yes, 3) days from application to formal approval.

We take the guess work out of structuring your loan, presenting it to potential funders and getting it settled. Working with a Broker makes it quick and easy to present your proposal in its best light to the lenders who will be in the best position to fund it.

We work closely with our panel to understand their lending parameters, ensuring your proposal is presented where it makes sense.

Create a Detailed Business Plan

One of the more important documents a lender will ask you for is a business plan. This plan should outline your cash flow, business structure, and business feasibility among other things. Your business plan should be detailed, thorough and to the point. This will help a prospective funder better understand what your business is about and help them to move quickly towards a favourable outcome for you.

Know your (number) facts

If you are purchasing a commercial property that has existing tenants, it’s a good idea to familiarise yourself with any existing leases. Yes, your valuer should absolutely detail this within their report, however it is a good idea for you to really understand who is in the building, how long they are there for, what terms have been agreed to and what your opportunities are to move them on in need.

Understanding the terms of your tenancies will give you a clear picture of what you are buying and how long you are committed to existing leases.

Summing up

Checking off these points puts you in good stead to obtain the funding to make your commercial property purchase. If you need assistance with funding your loan, please let us know. We are here to help.

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Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.