What is a Commercial Loan?
Commercial Loans have many similarities to business loans, but are secured by a commercial or industrial property. These loans are for the purchase or refinance of Commercial or Industrial property.
Are commercial loans more expensive than home loans?
Commercial loans are generally more expensive than home loans because of the nature of the transaction.
There are many cases where the all up interest rate on a commercial loan can be made cheaper than a residential home loan interest rate. This is mainly achieved by the strength of the deal, and the amount of money being financed.
Are Commercial loans different to Residential home loans?
The lending parameters for commercial loans differ considerably from residential home loans. The lending ratios are lower and the loan term is generally shorter.
As a guide, most commercial loan lenders will lend up to a maximum of 75% LVR on a full doc basis, with a few lending up to 70% LVR on a low doc basis. You will even find a very small number of lenders lending up to 80% LVR on commercial or industrial property.
Serviceability (affordability) requirements under a commercial loan?
Commercial loans do not come under the NCCP legislation so the lenders are more flexible with approving a commercial loan. For example, some lenders will consider cash flow forecasts in assessing whether or not to approve a loan. Other lenders will consider the performance of the business over previous business quarters and actualize the income of the business to assist in serviceability.