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Lending policies and interest rates are rarely found on lender websites. Unlike normal home loans, the pricing of a commercial property loan is rarely set in stone and many of the terms can be negotiated.
Australian banks and other commercial lenders each have their own risk profiles and maximum loan amounts.
Which lender is best for your commercial purchase depends on many factors.
Security For a Commercial Property Loan
Different types of security represent different risks to the banks. Standard commercial properties are usually the best type of security for a commercial property loan. Standard security is classed as having a wide appeal, is in a good location and is zoned as residential, commercial, industrial or mixed. While specialised commercial properties are more difficult to value and sell so they are a higher risk to the lender
Commercial Property Loan Purpose
Commercial property loans that are used for business or investment purposes, with the exception of residential investment properties, are not regulated by the National Consumer Credit Protection (NCCP) Act.
This means that most commercial borrowers do not have the same protection as home buyers.
The purpose of your commercial property loan will affect how your loan is assessed:
- Investment (low risk): To buy or refinance a commercial property that will be leased.
- Owner occupied (medium risk): To buy or refinance a commercial property that is leased to or occupied by your own business.
- Working capital (high risk): Financing the day to day operations of your business or liquidity shortfalls.
- Other purposes: All other commercial, business or investment purposes are considered on a case by case basis, e.g. buying an insurance broking practice.
Remember, it isn’t what your commercial property loan is secured on that determines the purpose but what your loan is used for.
Be careful if you’re using a commercial property as security for a loan that is not used for business or investment purposes such as buying a house by using your office as additional security. In this case, the loan would be regulated under the NCCP Act and some commercial lenders would not be able to approve your application.