Understand commercial finance before making your next business property decision

What can commercial finance be used for?

Choosing the right bank or lender to help you with commercial finance can make a big difference to the success of your company. Whether you’re a one-person company or a CEO looking to find space for a business that employs hundreds, a suitable commercial loan can give you an advantage.

When it comes to commercial loans – specifically designed to help finance commercial premises – the right finance options can help you with:

• Property investments: Whatever business you’re in, investing in commercial property can have its advantages. Commercial leases can be long term, and if there is a shortage in a particular city or suburb, the investment can be quite lucrative.
• Owner-occupied buildings: If you are looking for a new premises, or just want to take advantage of the right deal when it comes along, a commercial loan can be the right option.
• Refinancing: If you already have a commercial loan, giving it a health check every now and then can be a good move. You may have access to features that suit your business and its growth, or be able to capitalise on lower interest rates.

What are the pros and cons of commercial loans?

Whatever kind of finance you choose, there are always potential benefits and risks, and commercial loans are no different. Each business is different, and it’s important to find a finance package that is tailored to a business’ exact needs.

You need to find a lender that knows why your business is different, and why your industry needs banks and lenders to pay attention to it. Helping your business grow is what a bank or lender should be all about, and a suitable commercial loan can help you increase your capital.

Owning your own premises can give you a very lucrative asset that looks great on a balance sheet. It can also be a great thing to have when future loan applications are needed. A suitable commercial loan can also help you create equity, an asset if you want to own a business, invest in a residential property or own your own home.

As mentioned above, commercial buildings, whatever their use, can attract long-term leases. This can help with your financial stability if you are an investor. However, there are a few other things to take into consideration when searching for a suitable commercial loan. The first is that commercial property can be expensive, and maintenance can also stretch the budget.

While commercial properties can have long-term leases, they can also be vacant for long periods. Tax is another thing to consider when buying commercial property, with GST and Capital Gains Tax to be considered. Finally, understand the risk to your business as if a commercial loan is defaulted, it may be listed on the company’s credit report.