The Breakdown on
Commercial Loans

Commercial loans come in all different shapes and sizes. It could be a mortgage on a commercial property or a loan to cover business expenses such as new equipment, company vehicles and other operating costs.

There are many commercial lenders in Australia offering a range of products suitable for SMEs, from small, short-term business loans to larger, longer-term loans.

If you haven’t gone down this road before, the world of commercial lending might seem complex, but as soon as you understand the basics, you’ll start to feel more at ease.

Here’s everything you need to know about commercial loans.

How commercial property loans work

Commercial mortgages are very similar to home loans and investment loans.

You’ll borrow a certain amount over a set term and make regular repayments with interest. The loan could have a variable, fixed or split interest rate and could be structured as either principal and interest or interest-only.

As commercial property loans are seen as higher risk than residential loans, most products will generally have –

  • Higher interest rates
  • Shorter loan terms
  • Larger repayments
  • Less repayment flexibility

Most lenders will also require a larger down payment for a commercial mortgage, as opposed to residential home loans that may have low deposit options available.

What’s the difference with a business loan?

While a commercial property loan works in a similar way to a home loan, a business loan is comparable to a personal loan.

Both can be used for a range of general expenses, the major difference between them is whether you intend to use the loan for business or personal use.

Just like a personal loan, a business loan can be set up as secured or unsecured on either a fixed or variable interest rate.

If you have an asset to secure against your business loan (property, share portfolio etc.), you will be more likely to get a loan product with a lower interest rate.

As an unsecured loan comes with more risk, it will likely have a higher interest rate.

You could also take out a business loan to purchase another business.

In this situation, you would need to have equity in the business to be approved for the loan, which would involve putting your own money toward the purchase.

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LOAN MONSTER

Are you looking to refinance? Want to buy your very first home? Need an investment property loan? We can take care of it all for you at Loan Monster. Get in touch with our team and let’s get started today.

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How to apply for a commercial loan

When applying for any type of commercial loan, you’ll need to prove you can pay back the amount you’ve borrowed plus interest.

If you’re intending to purchase commercial property and lease it out, your lender may ask to see your forecasted rental income.

For a start-up venture or the purchase of an existing business, it’s likely you will need to make a business case for the loan.

This could involve showing the expected financial returns to prove the business is commercially viable and demonstrating cash flow to show you can make regular loan repayments.

Most commercial loan applications will require you to supply financial statements, proof of individual income, bank statements and identification.

Depending on your commercial lender and the type of loan you need, you may also be asked to provide the following documents –

  • Business plan
  • Cashflow projections
  • Business contract of sale
  • Lease agreement

Why use a mortgage broker for your commercial loan

There are many commercial lenders out there offering a range of loan products.

If you contact a lender directly, they will only be able to present the options they have on offer.

A commercial mortgage broker will look at multiple lenders and loan products to find the most suitable options for your situation.

It will save you from attempting to compare all the different lenders on your own, plus you’ll be able to benefit from their advice and expertise.

As lenders want to establish long term relationships with quality business customers, they may be more willing to negotiate on commercial loans.

If you have a mortgage broker representing you, they can negotiate on your behalf and get the best deal for you.

Your mortgage broker can also help you take advantage of any tax benefits associated with your commercial loan.

For example, if you own property that is used for business purposes, you may be able to claim deductions on expenses related to buying and maintaining the property.

Get Loan Monster on your side

No matter whether you’re an SME business owner or a sole trader, we’re here to help at Loan Monster.

Our mortgage brokers can assist with commercial property loans, vehicle finance, equipment loans and self-managed super fund loans.

We can do all the legwork for you so that you can focus on what your business really needs.

Get in touch with us today to find out more. We’ll get back to you within 24 hours, even on weekends.

GET STARTED WITH
LOAN MONSTER

Are you looking to refinance? Want to buy your very first home? Need an investment property loan? We can take care of it all for you at Loan Monster. Get in touch with our team and let’s get started today.

Get started today