Most banks traditionally offered three to five year loan terms to buy a commercial property. If you were lucky, some banks would stretch a loan to 10 or even 15 years. Whatever debt was left owing at the end of the loan term had to be refinanced.
In this instance, you were at the mercy of a new property valuation and a new assessment by the bank. Sometimes the bank’s appetite to lend to your business would change. It didn’t matter how well you were trading – if the bank didn’t like your industry, there was no guarantee the bank would extend your loan.
Making it easier to own your commercial property
The banks have made it easier to purchase and own your commercial property. Many of the major banks are now offering 25 or 30 year loans for commercial property, with banks taking the view – ‘if it works for home loans, why not for business loans too?’
If you stay up-to-date with payments, there is no need for new valuations or new interest servicing assessments, and no need to worry about the bank changing its appetite.
However, as this is a new initiative, not everyone will qualify as banks continue to test the waters.
Loan criteria
These loans are only available to owner-occupiers for the time being (e.g. for business owners who currently operate out of the property or intend to operate out of the property from settlement).
The current loans are generally limited to a maximum of $1 million only. Over time we expect this threshold to increase as the banks realise this product works for both them and their customers.
Benefits of the loan
Like any other new property owner, there are cash flow benefits in having an interest-only loan in the first few years. This can be accommodated, provided your business can fully afford the remaining payments to pay off the debt over the remaining loan term.
Fixed and variable rate options are available.
Please contact a member of our Finance Solutions team if you would like assistance in getting that loan to purchase your commercial property.