Who Are the Potential Borrowers for a Commercial Property Loan?
As the term itself suggests, commercial property loan is used by lenders only for business purposes. Commercial property loan is a term that is unheard of by most of us, whereas residential property loan is very common.
Residential loans are something that can even last for 35 years or so, while commercial property loans have to be repaid within 10 years. There are many factors that the lender has to consider while giving the commercial property loan. It is way more complex than getting a residential property loan. If you are considering taking a commercial property loan, then are certain points you need to look at to be ready for its further proceedings:
Required documents (Like Income statement, Bank statement, Tax Returns, ID proof, Address Proof)
Lenders charges other than interest rates
Penalties
Repayment period
Any other formality, it any
If you are somebody who wants to get your own office space or somebody who wants to expand your office then, you are considered as a potential borrower of a commercial property loan. Commercial property loan is usually taken in the given two cases.
When you want to buy your own office space:
It is further divided into two parts, namely:
A property that can readily be occupied
A property that is under construction
You want to open your retail outlet:
This one also is further divided into two parts:
A retail outlet which is ready to be occupied
A retail outlet which is under construction
In case the lender gets to know that the borrower of a commercial property loan is an investor, he backs off most of the time because, in that case, the investor leases out the property further and collects the rent. Whereas, if the borrower is opening their own office/Retail Outlet for which the commercial property loan is required, then generally they end up releasing the loan after completion of all the formalities. There are different types of borrowers of commercial property loans, and there is a different criteria for different people who are willing to apply for a commercial property loan.
For an individual who is self-employed/salaried:
He should not be more than 50 years of age while applying for the loan. If he is more than 50 years of age, then he cannot apply for a commercial property loan.
Partnership Firm/Company
Before the date of application, the company should be in existence for 3 years. It can be more than 3 years as well. However, not less than that if it is the case of a body corporate and a partnership firm. There are many financial ratios that are looked at in case of giving commercial property loan, which is as follows: Debt Service Coverage Ratio, Capital Gearing Ratio, Debt to Equity Ratio, Debt to Asset Ratio and liquid ratio. They are a very important factor in deciding whether the borrower would end up getting the commercial property loan or not.
You might be a professional who wants to have their own space for providing their services. Like in the case of a Lawyer, a Chartered Accountant, a doctor, or any other person who provides services to its client on a contract basis. Having your own space is like having a place where you can fulfill all your dreams. Everything starts from there actually.
Final Overview
The process for the borrower to get a commercial property loan might be more tedious and complex than any other loan. However, once you have made up your mind, then you would certainly end up getting it while having a lot of patience.
