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An unsecured business loan with online application and no upfront or early repayment fees.
If you're looking to expand your business but lack the funds to do so, a commercial loan can help. Whether you need to purchase equipment or commercial property, hire staff or otherwise improve your business activities, find out how commercial loans work and if one is right for your business.
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A commercial loan is a type of finance that can be taken out by individuals, partnerships, discretionary trusts and other groups, on behalf of a business or company. These loans are used to fund commercial operations that can help grow and develop a business, whereas a commercial property loan is a specific type of business loan that is used to fund the purchase of a property to be used for commercial purposes.
Commercial loans work much the same as other loan types but are specifically used for business purposes. They can be taken out by individuals or partnerships on behalf of businesses to fund operations, equipment and commercial property. As the loan amount will be used to invest in the business, the financials of that business will be taken into account when the lender is deciding whether to approve the loan.
There are also various benefits to commercial loans, as they are tailored for use by businesses. They offer flexible repayment options to support fluctuations in cash flow and the loan amounts on offer are usually much higher than with other loans. There are also related products specifically designed for commercial purposes, such as leasing finance.
If you're looking to invest in commercial property, you're generally looking at properties designed for use as an office, retail or industrial space. Unlike residential property that has relatively low risks and offers lower returns, commercial property has the chance of a bigger return on investment, but at a higher risk.
Buying commercial property is also more expensive and maintaining or upgrading it can potentially cost you thousands of dollars. In addition, commercial properties typically experience higher vacancy rates and this is why they have a higher risk quotient than residential properties. Commercial property loans are specifically designed for buying business property and may offer better commercial interest rates, but you can also use a normal commercial loan for this purpose.
The purchase of residential property is a more familiar process, so it's useful to know the key differences you'll encounter when purchasing commercial properties. These include:
While every commercial property is different, there are some general tips that can help smooth out the process of making your purchase:
Investing in commercial real estate has several benefits, but it involves a significant investment on your part. Here are the types of loans available to you if you're looking for finance:
These loans are an option if you're buying your first commercial property or refinancing an existing loan. They're ideal for purchasing an investment or occupied commercial property.
These loans are useful for constructing commercial properties, residences and sub-divisions. You could use one for completing a development project and selling the assets to repay your loan.
Sub-dividing land lets you increase the value of your property without constructing anything on it, but these loans can be used for construction purposes too.
You can use mezzanine financing to complete a project, complete an expansion or to borrow additional capital. This type of loan is normally taken out when a bank loan falls short of providing the full financing you need. Typically, lenders provide the funding based on the property's assets and the projected equity.
If you want to purchase an existing business or a successful franchise, you'll need to consider the business history, the value of the tangible assets, the estimated value of the intangible assets and the ability to yield good returns on investment. People generally use these business loans or term loans to invest in an existing business.
These loans are useful for keeping organisations in business by helping them purchase equipment and technology. From production equipment to packaging materials, this loan can help you utilise your capital to meet other expenses while funding your working capital requirements.
If you view abandoned properties and vacant lots as assets, these loans are ideal. They let you create, hold and develop vacant properties, then convert them into marketable assets that can double or triple your investment.
If you want to purchase property in a rural region, these loans are designed for that purpose. You could use them to purchase a property or to consolidate your debts.
One alternative to commercial loans is business credit cards. Check out our comparison to find the right one for you.
As this is a commercial loan, any defaults will be listed on your business's credit file and could seriously impact the future profitability of your business. Ensure that you don't apply for a loan that your business won't be able to pay back and that you have a solid financial plan of how you'll incorporate the added expense of the loan repayments into your business budget.
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hello,
me and 2 other partners are thinking to start a new business, we found a site and we intend to build 5 town houses, with the view of selling some and keeping some.
would you be able to advise on what would be the best financing and exit strategy?
Hi Franco,
Thanks for your question.
If you are building townhouses, you may consider getting a subdivision loan to finance your project.
Additionally, for expert advice on the most suitable home financing and exit strategy, you may want to consider getting in touch with a mortgage broker.
Cheers,
Anndy