Things to Know Before Applying For Commercial Finance

Most people in Australia tend to think only in term of approaching their own bank when it comes to arranging funds or finance or their business. Commercial mortgage lenders, asset finance lenders and online lenders are some of the other sources that can be approached to arrange funds at low interest and long repayment period.  This blog focuses on different things that businesses need to know before applying for commercial finance.

What security do you have for the finance?

Lenders, banks or other financial institutions usually require land and buildings as security for the finance, for large commercial funds. In this current economic scenario in Australia, it is very difficult for businesses to get a commercial loan for more than 70% of the value of the loan.

If you are looking for more than 70%, you should be prepared to look for other alternatives. Some lenders in Australia even allows businesses to refinance equipment that they already own, thereby enabling people to release capital into their business.

What is your credit history?

You have to pay lower interest for commercial finance if your credit history is perfect. Similarly, you will need to be applying to a specialist commercial finance lender, if your credit history is not perfect.

Which sector does your application fall into?

Not every lender in Australia is interested in lending businesses across the complete range of business sectors. Lenders are competitive only in the sectors in that they are keen to lend. Asset finance, plant & machinery, land & property mortgages and vehicle are different business sectors in which most of the commercial loan requirement falls in.  

Approach a well-known broker in Australia

In order to avail low-interest commercial finance, it is important that you should contact reliable and reputed brokers as they will deal with lots of lenders covering many different sectors and so can be more efficient in the long run. A good broker like Global Capital Corporation Private Limited will be able to provide help in sourcing of commercial funds for the different loan and more.  

Types of Construction Loans for Development of Residential & Commercial Properties in Australia

Property commercial finances are used by property developers and property investors in Australia who are looking for developing residential, commercial, industrial, office, retail and other properties in Australia. Such construction loans usually span between 12-24 months, depending on the lender and the circumstance.

Low doc property construction finance, stretched senior construction finance and full doc development finance facilities are general categories in which all the construction loan structure falls.

 

1. Full doc development finance

In order to obtain this type of financing, property developers or investors in Australia are typically required to provide the current financial data, pre-sales or pre-leases of the property and other additional documentations. In Australia, it is considered as one of the most inexpensive property construction loans available to the investors or developers, in regards to interest rates. Property investors or property developers may be able to obtain a loan to value ratio (LVR) of up to 85% of the Total Development Costs (TDC) of the property.

Or, they can get a limit of 70% of gross realizable value (GRV), whichever is the lesser amount. It is important to understand that this type of financing in Australia require a minimum of two years of financial statements and tax returns. In addition to this, at least 80% pre-sales for construction projects over 10 units is also required for approval of this type of finance for projects anywhere in Australia.

 

2. Stretched senior construction finance

Senior stretch loans are usually provided by the banks or other financial agencies for development of residential or commercial properties. Property investors or property developers may receive financing which is equal to or more than the total lending value of their current and fixed assets in Australia. At present, many reputed financing agencies provide stretched senior property development finance that can extend to 90% of TDC and 75% of GRV. 

 

3. Low doc development finance

One of the major benefits of availing these financing solutions is that it provides the property investors or property developers with the option of obtaining construction loans with minimum or no pre-sales. This type of finance in Australia is generally much more flexible in its lending criteria.