What is a Commercial Loan?
A Commercial Loan is a loan secured by a commercial property such as an office building, shopping center, industrial warehouse, or a building in use to run a business such as dairy.
A Commercial Loan is a loan secured by a commercial property such as:
- Offices in various sizes – anything from either a single floor or suite in a larger building, to entire buildings
- Light industrial units, warehouses and showrooms from a few square metres to 3000+
- Heavy industrial premises
- Retail premises, usually small, sole-operator premises although entire shopping centres occasionally come onto the market
- A building in use to run a business such as a dairy
- Development projects, including major residential or retirement complexes and tourism enterprises.
Commercial property, in many cases, can be purchased with tenants and leases in place.
In New Zealand, tenants are liable for fitouts and repairs. They are also usually liable for utilities, rates and insurance. This can mean a better net return for the commercial property investor.
Advantages of a Commercial Property:
Generate substantial Income from leases
Excellent appreciation of asset value
Lower your business expenses
How much can I borrow for a Commercial Loan?
On a commercial property, banks generally lend up to 65% of the value of the property or the purchase price. It is possible to get additional loan towards the commercial property by offering the banks other assets in security such as your home or investment property. Banks generally lend maximum 80% of the value of the home being offered in security.
Commercial Loan repayment terms
Most commercial loans repayment period is between 10-15 years. If you have borrowed some money to utilize in the business by offering a residential property in security, the funds secured against the home will have repayment period of 30 years. Interest rate on commercial loans is usually 1-2% higher than standard home loan rates.
What documentation do I need for a Commercial Loan?
- Commercial Property Sale and Purchase Agreement.
- Copy of the Lease Agreement between you and the business leasing the commercial property along with the mention of commercial rent excluding GST.