Investment in commercial properties usually accrues various benefits to investors who are operating their businesses. Currently, retail office and industrial properties in Australia are enjoying handsome yields that any rational investor would wish to invest. Some of these commercial property investments require huge amounts of investment outlay that are beyond an investors resources. It is at that point that investors will need a commercial loan to provide funding for the business or financial entity.
Various commercial loans
Over the period, a commercial loan will be repaid in full plus some accrued interest. One may ask, are commercial loans the finance a business needs to grow? Well, it will depend on the kind of business needs that the investor wants from a commercial investment. There are several available commercial lending options that an investor can take advantage of, and we will show you how to apply them.
Commercial loans meant for commercial property purchase or refinancing
An investor looking to invest in a commercial property can either be seeking to purchase a property for the first time for the business activities to be hosted on such a property. The business person may also be seeking additional properties or making some improvements on the existing property. These loans are applicable for purchasing the commercial property for the first time. Such loans are also useful in purchasing an occupied commercial property or even a refinancing existing loan.
Property construction and development loans
For those involved in development projects, a development loan is a useful facility to exploit. Such commercial loans normally are essential in commercial properties and residential constructions. The good thing with such a loan is that it is well-structured, flexible and fast to provide a strong commercial outcome for investors in need. Apart from financing development projects, it is useful in completing pending development projects or even selling off some assets to repay a loan.
Sub finance division loan
Developers may sometime subdivide the land and create new allotments to the property. Through subdividing the land to create a new allotment, the developer or land owner will increase the current value compared with the original parcel value. It is not essential to construct some buildings on the subdivided land to increase its value.
A subdivision loan usually assists a developer in financing the property subdivision process into smaller saleable allotments. Construction professionals come on board to assist developers since subdivision loans can be very complicated.
Mezzanine debt finance
Since the great recession, project investors and developers have become susceptible to large financing shortfalls as lenders have become more risk sensitive. It has made the investors seek to finance from sponsors like family and friends or in most cases larger joint venture (JV) equity injection to cover the financing shortfalls.
However, such a gap is sometimes too large for a traditional financing method to fill up necessitating for mezzanine financing. Mezzanine finance is useful in the completion of projects or expansions and even for securing additional capital. Such loans are designed to suit well complex commercial property transactions that need immediate attention. However, both the mezzanine lender and the property owner usually find it inherently risky especially where investments run into millions of dollars.
Buying or refinancing commercial loans for a business
Whenever a business person is seeking to purchase a successful franchise or an existing business, certain considerations like tangible and intangible assets value, ability to give favorable yield returns and business history should be accounted. After that, an individual can use these types of commercial loans to invest into an existing business. Varied reasons exist that prompt owner of commercial real estate or businesses to seek the refinancing of the property. Some may seek the refinance on the property to minimize the debt strain affecting business operations. Others seek it to tap into the commercial property’s equity where the real estate has substantial value that is capable of supporting various business dealings. The same principles like a favorable income and creditworthiness that are evident in any other refinancing are also applicable to this type.
Factory finance
Many manufacturing companies usually run huge property investments to support their operations. The properties that accommodate these factories have enormous machinery and equipment. Purchasing and maintaining some of those equipment and technology involve a huge investment that often needs a loan to finance such a venture. Apart from the financing investments, factory finance loans also assist fund working capital and other capital expenses.
Land Bank finance
With vacant lots and abandoned properties growing to be a prominent problem around Australia, there are ways to making them useful rather than eyesores or barriers. Investors can create properties in Downend communities to become assets through utilizing land banking. Investment in land banking opportunities converts the vacant and distressed commercial properties into marketable and useful assets that double or even triple the investment value.
Rural property loans
Some business persons prefer setting out their companies in the rural settings. Rural property loans are designed to cater for such purposes especially when it is hard to secure the normal loans. You can be able to access the rural property loans to utilize it to purchase a rural property. It can also offer additional funding for working capital, equipment or development. Even surprising is that rural loan can consolidate your bad debt in cases where banks turn down such a need.
Other types
Apart from these mainstream commercial loans types that enable an investor to acquire a commercial property, there are other types of commercial loans that offer support for business operations.
Line of credit: a line of credit is a flexible standby loan that investors utilize to finance their operations. Although the lender provides a preset limit to a business person, there is no payment of interest until the available credit is exhausted, but normal account fees are charged. The variable and fixed rates in such a loan are flexible to allow financing of business operations.
Overdraft facilities. There are times where a business is faced with unexpected expenses or other seasonal requirements. A business overdraft in such a circumstance is seen as the ideal financial option that can cater for such short-term financial needs.
Lease financing: It is a kind of loan where a company takes and leases out a commercial equipment or a vehicle for business purposes. All types of equipment whether small or large can be financed using this loan option for short term or long term. After the lease period is over, the equipment can be purchased at the original leasing finance contract price.
Chattel mortgage: Although this type of financing seems like a residential mortgage, its exception is that it is useful in purchasing a vehicle or equipment for the company rather than a commercial property. The mortgage over the vehicle purchased act as a good security when the lending of purchasing the vehicle is made. When there is full repayment of the loan, the mortgage will be wiped out as the ownership of the vehicle remains to the investor.
Cash flow finance: When you have a commercial invoice that is tied up, cash flow finance can provide the necessary money to handle business operations. Through such a facility, a business person can meet the working capital needs effectively in periods of irregular cash flow. Repayment of the loan is either fixed or variable where both principal and interest repayments are made. Cash flow facility boosts the capital for business operations in seasonal sales cycles or business acquisition periods.
