If you want it done right, you’ve just sometimes got to do it yourself. When you want your business to operate just how you need it to, the premises you’re operating from need to be perfect; and that means building it yourself. Getting a commercial construction loan can help you with that.
What is a Commercial Construction Loan?
Commercial Construction Loans or commercial mortgages involve getting a line of credit in order to build and construct any type of commercial, industrial real estate or retail workspace. They can attract a higher interest rate than residential mortgages but finance options do exist if you’re ready to expand.
What Are the Requirements to Get A Commercial Construction Loan?
In order for the lender to accept your application for a development loan, you do need to meet additional criteria, especially with the recent tightening on banks’ ability to give business loans.
At the moment, we are seeing a maximum LVR allowable for commercial property loans of 70%. LVR, or Loan to Value Ratio, is calculated by dividing the loan amount by the purchase price, or valuation, of the property and multiplying it by 100.
Are Commercial Construction Loans Different From Commercial Property Loans?
Commercial construction loans can differ in both loan interest rates as well as the loan term from commercial property loans. Unlike with home loans, commercial construction loans can attract a higher interest rate do to the additional potential risks.
Loan terms vary but we’re seeing business owners usually taking these out for about 25 years, paying off both principal and interest.
Do I Need to Have a Licensed Builder Construct the Property in Order to Qualify for a Commercial Construction Loan?
Depending on the lender you generally do not need to use a licensed builder in order to raise the finance for a commercial building construction loan and can proceed as an owner builder.
This is particularly attractive to small business owners however, most lenders will prefer that a qualified and experienced licensed builder construct the property due to the additional risks of things going wrong.
It is also very easy for an owner builder to just flip out their credit card to quickly cover an expense. That can get dangerous!
How Do I Get A Commercial Construction Loan?
We obviously recommend you talk a commercial finance specialist with an Australian Credit Licence.
If you’d like to have a chat about your commercial development loan needs, we at Commercial Loans Melbourne. Pop into our convenient Midland or West Perth office locations, or we can even come to you. It’s that easy!