Commercial loans are a type of financing specifically designed for businesses. They can be used for various purposes, such as purchasing property, equipment, or covering operational costs. Similar to residential mortgages, commercial loans involve borrowing money from a lender (usually a bank) with the promise to repay it over time, along with interest.

Yes, commercial loans are typically secured loans. This means the borrower pledges an asset (collateral) to secure the loan. If the borrower defaults on the loan (fails to make repayments), the lender has the right to seize the collateral to recoup their losses.

Common types of collateral for commercial loans include:

• Property: The commercial property itself is often used as collateral, especially for loans used to purchase the property.

• Equipment: For loans financing equipment purchases, the equipment itself can serve as collateral.

• Inventory: A business' inventory can also be used as collateral.

• Accounts receivable: The outstanding invoices owed to the business by customers can be used as collateral.

• Personal guarantees: In some cases, business owners may be required to provide a personal guarantee, meaning they become personally liable for the loan if the business defaults.

The specific type of collateral used will depend on the loan purpose, the borrower's financial situation, and the lender's requirements. It's important to note that even though commercial loans are secured, there may still be some risk involved for the borrower. If the value of the collateral is insufficient to cover the outstanding loan amount, the lender may pursue other avenues for recovery.

Interest rates on commercial property loans can vary depending on several factors, including the loan amount, term, your business credit history, and the current market conditions. Generally, they tend to be slightly higher than residential mortgages. To get an accurate idea of rates, book a time to chat so we can assess your specific circumstances and obtain quotes from different lenders.

The term of a commercial property loan can vary depending on the loan type and property. They typically range from 5 to 30 years, with some options for shorter-term financing.

Construction loans are a specific type of commercial loan designed to finance the construction of a commercial property. These loans are typically short-term (12-24 months) and disbursed in stages as construction progresses, upon verification that specific benchmarks have been met. Once construction is complete, the construction loan is usually converted into a permanent commercial mortgage loan.

Obtaining a commercial loan typically involves a more complex process than a residential mortgage. Here's a simplified breakdown:

1. Pre-approval: Talk to us to understand your borrowing capacity and get pre-approved for a loan amount.

2. Documentation: Prepare a comprehensive business plan (for business loans), financial statements, and tax returns to demonstrate your financial health and loan purpose.

3. Loan Application: Formally apply for the loan with your chosen lender, providing all required documentation.

4. Underwriting: The lender will assess your application and the property (if applicable) to determine the loan terms and interest rate.

5. Approval & Settlement: Upon approval, finalise the loan agreement and settlement process.