Found your desired commercial property that meets your business needs? Great! Now the next step is to ensure that you manage to secure the commercial property loan require for you to purchase that dream business property.
Contrary to popular belief, taking a commercial property loan and a home loan is different. In general, while there’s a basic set of requirements all customer need to satisfy in order to take up a loan, commercial property loan comes with a set of specific eligibility standards unique to itself.
If this is your first time buying a commercial property loan, here are 2 things you need to know to ensure a successful business loan application.
For what purpose will you be using your commercial property for & how will it generate extra income for you?
Are you going to use the commercial property for your own business? If so, the banks or financial institutions usually require you to demonstrate ho you plan to use the newly acquire space. By being able to demonstrate how you owning a commercial property will help your business to grow, expand and generate more revenue, you will have a higher chance of not only getting a commercial property loan but also one that is more reasonably priced and acceptable.
Banks are generally very risk adverse. They prefer to work with businesses who have a clear idea and plan on how acquiring a business property fits in with the overall business strategy. The more crystal clear and sound your business plan is, the greater confidence the lending institutions have in your business and the higher chance you will get that business property loan.
Show how you’re able to repay the loan
The first thing most banks look at before approving any loans is the business debt-repayment ability. Banks will not only look at the cash inflow but also the outflows and outstanding debts a business is currently holding.
In the home loan example, there’s a Total Debt Servicing Ratio (TDSR) framework to prevent individuals from over-stretching themselves. Likewise, there’s a similar framework in business loans that prevent businesses from taking on more debt than they can pay back.
If you’re able to show the lending institutions a healthy debt-repayment ratio, your chance of getting that commercial property loan is greatly increased!