10 Essential Commercial Property Loans Questions

The process of getting a commercial property loan is not a walk in the park as assumed by many. Despite having the property for quite some time, you might have to go through a lot of work to get your loan approved by a lender. Here are ten things you should answer to make your commercial property loan approval faster than you would normally expect.

Can you act like a pro?

Even before going to the lender to try your luck, it is better to prepare everything your lender would normally ask. Some documents you have to keep within easy reach are recent financial papers, filed tax returns, bank statements, rental schedules, copies of sales contracts, property outgoings statements, copies of leases, and asset and liability statements. Make sure that they are all filed neatly and in clear copies.

Do you know the value of your property?

Knowing the value of your property does not only gives you the idea on on lender’s offer, but also makes you look more professional. There are two ways to know your property’s value: Comparison Basis ( the rate of your property compared to the recent sales of a similar property based on its area) and Capitalisation Basis ( the cap rate is therecent sales of a similar property divided by its net income, then multiply the cap rate to your property’s net income).

Do you have a business strategy?

Make the lender clearly understand your business strategy. Be on point as much as you can when explaining why you need the loan and how it can improve your business.

Do you have your business structure diagram?

If you have a complex corporate structure, it is better to accurately put it into a diagram to clearly present it to the lender. You may include associated businesses, self managed superannuation funds, family trusts, and special purpose property vehicles.

Can you prepare a detailed tenancy schedule?

As you have a commercial property, you are expected to have an updated tenancy schedule that may include the tenant’s name, unit rented, the business concerned, amount of rent, and the span of the contract with the terms and conditions. This will give the lender an idea on your gross income.

Do you have an idea about the market?

Lenders usually respect those who are familiar with their trade and the competitiveness in the commercial property market. Take some time to study your property’s assets and those nearby.

Did you keep record of your cashflow?

The lender will easily understand how you handle your assets when it comes to capital expenditures, tenancy vacancies.

Can you make a detailed assets and liabilities?

The lender can easily see your financial position if you give them your detailed assets and liabilities. Include the name of the owner, the asset, its estimated of value and net income, loan secured against the asset, name of lender, conditions of loan with the interest rate and loan expiry date. With this, the lender will see how the loan will suit your need.

Know your Loan Service Capacity

Know your ability to service loans in two ways: All Sources and Stand Alone. All Sources Servicing means that your total income will be divided by you over all commitments while Stand Alone is dividing your net income by interest payments.

Get ready to set your own terms

Have the initiative in setting the terms of the loan you are applying for by stating what interest rate you are willing to pay.

With all these said and done, know that it is better to have a professional commercial mortgage broker to help you out with your loan. Lenders know that a broker has other options and they will know the best offers they can set in an agreement.


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