If you want to move your business to a new property, it is time to familiarize yourself with short term property loans. This type of loan will help you to buy or refurbish non-residential properties. These loans are meant for properties that operate a business, such as office spaces, restaurants, and shopping complexes. Financing, including the acquisition, expansion, and property construction, gets accomplished through property loans. Taking out this kind of short term business loan is beneficial as it can help you generate higher returns. So, how does it work?
The Working Process
Commercial properties are divided into two types. One is office spaces, and the other is retail outlets. These two types are further divided into under-construction and ready-to-move properties. A loan against commercial property needs the borrower to mortgage property to get the loan approval. Mostly, the asset is preferred as another commercial property and not a residential one. It offers the lender a sense of security against defaulters as they can get possession of the asset if, by chance, the borrowers fail to repay the loan.
Who can avail of a short term property loan?
Business professionals who have companies are eligible for a commercial property loan. Besides, self-employed people like doctors, lawyers, and chartered accountants can also take out money from this kind of short term business loan.
The purpose of a commercial property loan
You can use a commercial loan as per your requirement, compared to quick caveat loans and others. But generally, borrowers use this kind of business financing for the below purposes.
- Investment- To purchase or refinance a commercial property on lease.
- Owner-occupied- To buy or refinance a property leased to or inhabited by your business.
- Working capital- Financing the daily business operations or liquidity shortfalls.
- Other purposes- Apart from the above, you can use this kind of loan for a different purpose. For example, you can buy an insurance broking practice with this loan type.
Steps to take out a commercial property loan
The process of taking out a commercial property loan is almost similar to getting money from quick caveat loans and other loan alternatives. You only need to follow the below steps to access this kind of loan.
Step-1: Seek help
The first step that you need to consider is to look for professional advice to take out a property loan. If you have a financial advisor by your side, you will get many benefits. The person will help you to go through the loan terms and lease agreements, but you can also get the loan approval with the best and most flexible terms.
Step-2: Find a lender
In the second step, you need to look for the most suitable lender for short term property loans. When searching for a lender, you will come across many. You need to shop around for one who offers the most affordable interest rates with flexible loan terms, conditions, and lease agreements. After all, you want a loan that will suit your needs rather than a generic one. Besides, as taking out a commercial loan is a big commitment, you need to be careful before choosing the right lender for your company.
Step-3: Know the requirements
While applying for quick caveat loans, or commercial property loans, you should know the lender’s requirements. As you might know, the requirements will vary across lenders. As a result, it is crucial to have a thorough read through to ensure you have everything on hand before you go ahead.
Factors to keep in mind for the commercial property loan approval
While applying for a commercial property loan, you need to remember the below factors that can affect the loan approval significantly. The factors include-
- As a borrower, before going ahead with this kind of business loan, you need to organize a few documents like address proof, ID proof, income statement, tax returns, and a productive business plan.
- The second factor you need to consider is the loan processing fees. For commercial property, some lenders can charge 1% of the loan amount as a processing charge.
- One of the crucial factors that affect the approval of commercial property loans is the interest rate. As mentioned earlier, this type of loan comes with higher interest rates compared to other property loans. The loans can also have other costs such as, application fees, annual fees, and the overall cost of the loan. As a result, when you have cash flow issues, you might not pay all these fees with interest.
- Another factor that plays a crucial role is the term of the loan. The period of commercial property loans is short compared to other loan types. The maximum repayment term is ten years.
Summing It Up
So, this is all you need to know about commercial property loans. Through the above segments, you can see that taking out this kind of short-term business loan is a big commitment and can come with higher interest rates. But if you find and settle for the best lender, you will get more benefits. If utilized correctly, you will see that you can generate higher returns. So, do you research and apply for a commercial property loan.