Obtaining Commercial finance with an 80% LVR (Loan to Valuation Ratio) can be very difficult if you don’t want to add extra security. Commercial lenders seem to be a lot more conservative than those lending for home purchases. Typically a home loan can borrow up to 95% of the value or purchase price (hopefully the same figure) whereas with a commercial property you are generally limited to around 65% maybe 70% in some cases.
Security for Commercial loans can be a wide range of different types of properties from small industrial units to broad acre farms, and there is a different set of rules for each one. Recently one of our clients referred his friends to us as they were looking to buy an industrial unit to operate their electrical business from. They wanted a good rate/product (as does everyone – and so they should), they wanted to quickly have the loan approved. They had a unique corporate structure which when explained correctly, didn’t present any great difficulty to the bank. The urgency was driven by two other parties also looking to buy this unit. We were able to provide a rapid approval that didn’t involve having the property valued by a commercial valuer. Unlike residential valuations, commercial valuations can take 2-3 weeks to complete, and cost many thousands of dollars. (about 0.5 – 0.75% of the purchase price).
The quick approval process (because we had eliminated the valuation) , plus the fact this lender would lend to 80% of the purchase price helped these clients win the race to buy the unit. They also got a very attractive interest rate. The funds they didn’t have to contribute to the purchase means, they have the start of their savings for the next investment property safely tucked away in an offset account, saving them interest on they loan they had just taken out.
Your commercial lending situation may be simple or it may be very involved, either way we would love to talk to you about how we can help . Even if you have a commercial loan with the bank you have always banked with, please feel free to contact me and I can give you some advice on what options may exist for you to improve your interest rate or maybe you just don’t want to have to give the bank your financial statements every year.