Terms loans are commonly used to buy commercial real estate, or to buy an existing business or franchise.
If you’re familiar with home loans, you’ll understand the principles of how a term loan works. Generally speaking, this type of loan can be used for two purposes – business or property.
Business purposes includes buying a trading business or franchise, a new business start-up or the expansion of an existing business.
The types of commercial real estate purchased encompasses a very broad spectrum. The types of real estate include established, vacant or to be developed land; owner occupied or investment; and zoned from retail, industrial, office, warehouse, factory unit, to specialised property such as aged care facilities, or hotels and taverns.
These loans almost always require security, generally over the commercial or residential property, and in the case of business loans, the assets of the business as well.
The amount you can borrow and the interest rates you’re charged are dependent upon a number of factors including loan purpose, security offered, history of the business, management experience and strength of your repayment capacity.
And, of course, you may be able to vary the loan amount, loan term, choose fixed or variable interest rates, and choose to pay back principal and interest, or interest only.
There are so many choices to consider, and that’s why enlisting the help of an experienced business finance broker is a smart place to start.