'Commerical Loans'

Do you understand the concept of diversification but just can’t bring yourself to venture into shares, storage areas or agri business. You have always known property, your parents have always known property and property is what you do.

Will you consider commercial property? Commercial property is becoming an even more competitive investment in the recent years. If you also are renting your business premises, whether it is a shop, offices, warehouse or factory, consider the advantages of owning your own commercial premises if the costs are not prohibitive.

Positives of Commercial Properties:

Money is easier to get for purchasing commercial properties:

• Many lenders are happy to lend for commercial properties with interest rates slightly higher than home loans but not prohibitive.
• Many lenders are now able to lend up to a maximum of 75% of the value of the commercial premises.
• Terms have increased from 5 years in the past to 20 or even 25 year terms.

Diversified investment option:

• The commercial market operates independently of the residential property market.

High income returns:

• If you are renting commercial property, you know the rentals keep going up

Less tenancy issues:

• Unlike residential property, the tenants have the responsibility of the upkeep and maintenance of your property
• If you have a good tenant, they may even do routine maintenance and upgrading to ensure their business is reflected in a professional manner
• The management of the property is therefore significantly less than a residential property

Pitfalls of Commercial Properties:

• Usually more difficult to find tenants for vacant commercial properties
• If the property is specialised, even greater difficulty in finding tenants.
• The lease dictates the value of the property � therefore, if there is a long term, secure lease in place, the more valuable the property.
• Commercial properties are not only subject to the commercial property market, they are also exposed to the risks of the tenants industry.

Ways of financing Commercial Property:

• You are able to use equity in your home to partially or totally finance the purchase
• Able to use a great part of the commercial property to secure the loan. Lenders often will use a rate for risk method to dictate the interest rates and fees for a commercial loan unlike a residential loan or business line of credit.
• Able to use a combination of residential and commercial finance to make it happen often with little or no out of pocket expenses from you.

Again, I reiterate that if you are currently renting your business premises, look into how much it would cost to purchase premises you could work from. Many people have been pleasantly surprised how cheap the purchase of commercial property is compared to the rental return they currently command.  Like homes, commercial properties can start from the low $100,000 and the top end is unlimited.

Therefore, spend a few days researching this newly competitive and diversified investment option to see how it may suit your situation.

Harry Pontikis is the Director of Chocolate Property - a licensed real estate agency.

What can your commercial loan broker do for you? That all depends on which broker you choose to do business with. As is the case for most things in life, there is a variety of financial institutions to choose from. However, not all brokers will provide the same options, variations on loans, and services. Each commercial loan broker will offer similar products and services, but no two will offer the exact same set of products and services. Thus it is important to analyse the advantages and disadvantages of potential commercial loan brokers before choosing one.

Things to Consider

1. What will the broker finance? - Many brokers specialize in only financing certain types of opportunities and investments. For instance, you might be especially interested in making an investment in an income property, so you will require a commercial property loan. The commercial loan broker you are looking for should fit your needs and hopefully be willing to finance a variety of different income properties. Perhaps you wish to develop a diverse portfolio of income properties by investing in an array of apartments, hotels, office buildings, health care centres, and industrial spaces. To realize this strategy you will need to find a commercial loan broker willing to extend a commercial property loan each of these various income properties.

Some brokers may limit the scope of properties they are willing to finance as a way to limit their risk or exposure to that sector of the real estate market. Remember, financial institutions are in the business of making money just like you. If they feel the reward of the loan does not justify the risk, they will not be very interested in financing the venture. Odds are you can find financing elsewhere, but for simplicity and efficiency you will want to limit your relationship to one or two commercial loan brokers.

2. Are the Rates Competitive? - You can’t blindly do business with a commercial loan broker just because they offer a great commercial property loan along with all the other products and services you require. One of the driving factors of successful businesses is minimizing costs. A commercial loan is not free, and thus the cost of the loan should be analysed. The cost of the loan obviously includes the interest rate you will have to pay on the balance of the loan. This is a real cost, and should be compared to the rates other competitors offer.

Once you have compared interest rates, don’t think you are done analysing costs. Financial institutions always charge a variety of cleverly named and sometimes disguised fees on commercial loans. Find out what kind of fees your commercial loan broker is charging and compare those to their competitors. At the very least, you can keep your commercial loan broker honest by monitoring the fees charged.

3. Don’t Forget about the Intangibles. - Products, services, and rates are all things you should consider when selecting a commercial loan broker. But do not undervalue the type of relationship a broker is willing to commit to. Some commercial loan brokers are completely hands off, and will offer little or no assistance beyond booking your loans. Others provide more personal assistance to meet your needs, even serving as a sort of unofficial consultant to your business. Odds are you will want a commercial loan broker that is willing to develop a real relationship with you and your business. The experience and business knowledge they provide to your business is often worth more than a slightly better interest rate. Selecting a commercial loan broker that is committed to seeing you succeed will go a long way in helping you realize success.

Adam Smith is an informational author for 10X Marketing. For more information on a commercial loan broker, please visit http://sncloans.com/commercial-loan-broker.html

Commercial loans are available at competitive interest rates and repayment terms from our lending market leaders. These can be used to start or expand and develop your business or for the purchasing of equipment. Commercial loans could be the most flexible solution to meet your financial needs but it’s also important to consider the effect of loan repayments on your cash flow and business assets.

When looking at commercial loans you will need to assess your requirements for repayment terms and compare interest rates, known as the Annual Percentage Rate or APR, of different lenders in order to decide which loan is best for you. The repayment term can be anything between one and fifteen years on average and you have two choices with regard to interest rates: fixed interest rates and variable interest rates.

Fixed Rate: The interest rate is set at the beginning of the term of the loan, the percentage given to you being determined by your circumstances, the amount of the loan, the term and your assessed ability to repay the loan by the due date. Your monthly repayment amount remains constant, regardless of changes in the bank base rate which is an advantage if the rate increases but a disadvantage if it drops.

Variable Rate: The interest rate you pay is linked to fluctuations in the bank base rate and can therefore increase or decrease depending on what is happening in the open market. You will consistently pay the current market rate plus an agreed premium but because the base rate can change, your monthly repayments could go up or down. This is an advantage if interest rates fall but you may end up paying a lot more if rates rise.

There are a number of reasons why commercial loans can be a beneficial way of raising the money you need. The first is cash flow. Because your loan repayments are agreed and set for the term of the loan your cash management can be more predictable from month to month. Secondly, you have a large degree of flexibility on how you use the loan, including paying off other higher interest loans. Commercial loans also enable you retain ownership in your company by making it unnecessary for you to raise funds by selling an interest in your company to an outside investor. Interest payments on commercial loans are also tax deductible and are made with pre-tax money. A further advantage is that if you back your loan using capital equipment then you remain the legal owner of the equipment. You must be aware however that if you do not pay back the loan and default on repayments then the lender is able to foreclose on any assets backing the loan and to sell them to pay back the money owing.

Comparing the APRs of commercial loans is a good indication of how competitive loans are but it is also important to pay attention to the small print on the loan agreement. If you think you may be in a position to pay back the loan before the due date then you’ll be wise to check the early redemption policy of the lender. Some lending companies charge up to two months interest if you settle the loan within 3 to 5 years and before the due date, which can increase the total cost of the loan. It may be cheaper to take a loan with a slightly higher APR but with no redemption penalty.

About the Author
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