Commercial loans are loans for business purpose or loans where securities are not of standard nature. These loans could be too specialised for most bankers and brokers to handle. This is fortunately not the case for our brokers as there are extensive commercial banking background within our team.

Most lenders consider a loan purpose of business nature where the underlying activity is not for principal place of residence, standard residential investment or publicly listed shares investment purpose.

A loan may default to a commercial loan if the underlying security is not of standard residential property in nature, this may include office buildings, warehouses, retail shops, mixed use properties, commercially zoned properties, industrial estates, agricultural land, serviced apartments, car parks, pubs, hotels, nursing homes, restaurants and many more.

Best Melbourne Brokers will explore all avenue to try obtain standard residential loans for our customers before recommending commercial loans because interest rates on commercial loans are generally higher.

Other types of commercial loans include overdraft for day to day business banking, be it secured, partially secured or totally unsecured. Believe it or not, there are banks willing to pre-approve their existing customer up to $50K or more unsecured overdraft at the moment.

The standard differences between commercial loans and residential loans are as follow:

• Loan to value ratios – Commercial loans normally go up to maximum 80% LVR whereas residential loans could potentially lend up to 95% LVR
• LMI – Lenders mortgage insurance are not applicable for commercial loans
• Interest rates – Commercial loans tend to attract higher interest rate, normally 2% higher
• Establishment fee - Commercial loans generally attract higher upfront fees, on average 1% of loan amount.
• Valuation cost – Valuation fee are normally paid by borrower with Commercial loans (average around $1K), whereas lenders will generally cover this cost for residential loan applications
• Features – Commercial loans tend to not come with pro-pack benefits, such as fee free offset account, though some banks do offer them
• Term of loan - Most Commercial loans term are 15 years (30 years in some cases), while the standard loan term for Residential loan is 30 years.

Whether you are starting your business, looking to grow or seeking assistance managing day to day operating cash flow we have a solution to meet whichever part of the cycle your business is in.

Believe it or not, there are lenders willing to approve low doc commercial loans up to 80-100% of property valuation at the moment. Feel free getting in touch with us to find out more.