Commercial Property Loan

The Significance of a Loan for Commercial Property

A loan for commercial property is trickier than a loan for residential properties. This is because the lender is skeptical when it comes to lending commercial loans. However, some of the lenders are completely comfortable when it comes to lending for commercial properties that are ready to be used for running a business. The differences between the funding of commercial property and a residential property are:

Commercial Property Loan
Commercial Property Loan
  • Percentage of funding –  A residential loan covers close to 80-85% of the value of the property, while a loan for commercial properties covers close to 60-65%.
  • The rate of interest is one more significant difference. The rate for commercial loans is usually 1-2% higher than the rate for residential properties.
  • The processing fee for a residential loan is a fixed amount, however; a loan for commercial property is charged 1% of the value of the loan.
  • The lender of commercial or business loans will be very much concerned about the builder. If the builder carries a bad reputation, the lender usually does not provide the loans. Also, the lender or bank takes a very close look at the timeline of the completion of the property. If the property is not complete, then the lender is skeptical to provide the loan.
  • In both commercial loan and residential loan lenders, before lending any loan, the lender evaluates the technical specifications of the property. However, a commercial lender looks at many more specifications and at the same time I very particular about all the statutory approvals provided by the concerned authorities.
  • The tenure of the loan offered for residential properties can go up to 30 years, while the tenure of a loan for commercial property is limited to 10 years.

How to Select the Best Commercial Lender?

Commercial Property Loan
Commercial Property Loan

The lender who can provide a loan for a commercial property should have years of experience working in the market. Some of the newcomers might not be aware of all the technical specifications and all the statutory approvals. Ignoring any of the factors would increase the chance that the borrower might face a problem in the future. Some of the other factors that need to be looked at before choosing the commercial lender are:

The lender should have a nationwide presence as it adds more credibility and assures people that this lender has many customers who trust the lender. Also, a national lender takes care of all the processing of the loans and does not charge any broking fee. Overall, a lender with presence across the nation increases the factor of convenience and reduces the overall cost related to the loan.

Please note that every commercial lender is a salesman who tries to reach or exceed the monthly sales targets, and so the borrower should be more alert and ensure that they are not getting ripped off.

Many lenders sell loans for commercial properties online. Hence, there is a big possibility of the borrower getting confused with all the options that are available in the market. Even though this option is digital, the borrower must be careful while getting across the terms and conditions. Some of these terms are mentioned in fine writing, and thus it is vital for the borrower to read every condition before opting for the loan.

Overall, getting a loan for a commercial property is a lot simpler when compared to the early days. However, both the lender and the borrower should still go about the process diligently.

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