Some key questions to ask when seeking business finance as opposed to commercial property finance include :-
- Are all taxes, superannuation and other statutory payments paid to date?
- Have financial accounts, including balance sheet and profit and loss statements been finalised for the previous year? (Note that lenders require a minimum of 2 years of the most recent financials in order to assess any business funding application)
- Are there any outstanding Interim Management Accounts?
For commercial property finance, some key questions to consider when purchasing include :-
- What is the rental income?
- What are the terms of the current or proposed lease?
- Is there any need for repairs and/or major works?
- What is the entity of the purchaser, whether company, individual, trust or SMSF?
Whilst the major banks are offering competitive pricing for commercial property loans, they often wish to manage the entire business relationship. This could be an advantage to some clients.
However, there are a number of specialist commercial property financiers that assess the transaction on its merits and do not require an ongoing banking relationship.
When seeking a Commercial Property Loan, a borrower should be aware of the term “notional term” and the standard term. Some banks use the 15 year standard term to calculate the loan payments, while committing to an actual term of 1 to 5 years. In doing so, the loan is amortised over a 15 year term, yet the commitment is only for 5 years. On expiry of the 5 year term, the borrower has to re-apply or re- finance. Some lenders do this as the cost of their capital is lower for shorter commitments and they can deliver a lower “headline” rate of interest. Specialist commercial lenders can offer loan terms from 15 to 30 years on commercial property and various other loan products to suit the borrower’s requirements.