Posted on July 19, 2021
Commercial Property Finance
What is commercial property finance? Commercial property finance is specially designed to finance residential property used for commercial purposes, whether commercially or for your gain. It functions similarly to a residential loan with some key differences, which I’ll cover below regarding the loan-to-value, loan-to-term, and term of the agreement.
Commercial property loans are available to all borrowers, including business owners who wish to buy new premises for their business. The lender will usually require a good credit score to assess whether the current market interest rates justify the risk. They will also check the value of the proposed property along with several other aspects.
The lender will always look at the credit rating and history before making any commercial property finance deal with you. If they believe that you have an excellent credit rating, they will offer you a low-interest rate. However, if your credit score is less than perfect, then your offer may be slightly higher but still within the range, the lender is willing to go for. The lender is always protecting their interests, as there is no point in making any commercial property finance deal with you if the chances of you defaulting on the repayments are high.
It is important to remember that the commercial property finance interest rate that you will be offered is subject to a number of factors. This is especially true during the financial climate in which we currently find ourselves. In recent times there has been a very noticeable increase in the number of people that are having to make use of credit cards to make ends meet and the number of commercial real estate lenders applying high rates of interest to small business loans. These factors have combined to make commercial property loan rates somewhat more competitive. The lender has to take this into account, and thus, any changes in commercial property loan rates could mean big savings for you.
The most effective way to get competitive rates on your commercial property finance is to make use of the combined services of a specialist commercial property finance broker. By entering into a deal with one of these brokers, you can benefit from their knowledge of the market place, their ability to source out top-quality lenders for you and their ability to get competitive rates from them. These lenders will be able to pass on the saving they make by offering lower rates of interest to you because they will be competing against each other. If you were to go with your own lender, then you would have to compete against the majority of business loan products on the market.
By choosing a broker to help with your commercial property financing, you also get access to an extensive choice of short-term and long-term loans, all of which are designed for your business needs. These loans also come with different repayment terms which are suitable depending upon your cash flow situation. As well as the more standard commercial loans, you can also go for a business cash advance or commercial bridge loan. These are cash loans which are generally secured against the commercial property you are financing.
One of the main reasons why banks and building societies set up these loan schemes was to provide lenders with a ready supply of residential and small businesses for whom they could compete for finance. Of course, it is not just the banks that provide this kind of finance, but there are commercial lenders who deal exclusively with this market, and they tend to offer competitive rates to those looking for residential and small business loans. Although you will find some higher interest rates attached to this type of loan, it is still generally a good deal as the rates are generally based on similar principles to those applied to standard properties.
To find out if you qualify to secure one of these types of commercial loan, you should contact one of the commercial finance brokers who can help you assess your chances of success. Just as with standard mortgages, the quality of the borrower will affect the rate of interest charged on the loan. If you have a good credit rating, or a relatively established business, you will probably qualify for a lower interest rate and, in some cases a zero percent financing fee. If your business is relatively new, or you have a poor credit rating, you will probably qualify for a higher interest rate. The broker can explain the differences between the two and help you understand the options open to you.