Comparatively, residential loans cater for dwelling places like single-family houses and condos. Commercial loans cater for commercial places like multifamily homes, hospitals, restaurants, and other businesses making them technical in nature. Based on the business type and financial needs, Types of commercial loans exist in various types.
Types of Commercial Loan Types
-
Low Doc loans
These Loans need less documentation or income proof to access than the rest loan forms. Such loans are designed for self-employed borrowers and small businesses who lack enough documentation that show their income position.
Documentation needed
- An accountant’s letter for approving commercial lite doc loans
- Bank account statements
- Business Activity Statements (BAS) to prove the business activeness.
- No income evidence is required in some cases.
Kinds of collateral properties for a low doc
- Residential property
- Industrial property
- Commercial property
- Rural property
Benefits of Low Doc Loan Approval
Apart from the minimal paperwork that this form of loan offers, other benefits that one enjoys are:
- For self-employed individuals and small businesses that possess good credit records, it may be a good starting point.
- Recommended for small businesses that possess limited financial statements.
- Favorable option to bad credit loan.
- The rates offered by many lenders are similar to conventional loans.
- A borrower that have enough equity but irregular income can also access the loans.
-
Full Doc loan
Full doc loan is the most common commercial loan type that most Australian commercial lenders offer.
Documentation
Credit managers will use most current income and financial statements obtainable on application to verify such loans. To qualify for such loans, you will need the following verifiable income documents that will accompany a commercial property as security:
- Profit and loss statements.
- Tax returns, both personal and company.
- Balance sheets.
- Pay-slips
- Assessment notices
- Group certificates
- Commercial property Tenancy Schedules.
Lenders that offer commercial full doc loans
Some lenders are well publicly known while others are not commonly known. Listed are Australian lenders that offer best full doc loans:
- National Australia Bank
- ANZ
- Bankwest
- Westpac
- Bank of South Australia
- Bank of Melbourne
Overseas banks and lenders of full doc loans are HSBC, Barclays Bank, Citibank, ING Bank amongst others.
Loan costs and interests
The costs of obtaining such a loan are:
- An establishment fee charge for loan set up.
- Some aggressive lenders may waive application fees/ establishment fees for good credit rating borrowers.
- In certain scenarios, some lenders may rebate after-settlement valuation fees cost.
Interest rates: Vary according to the lender’s type but are cheap in comparison to other loan forms. Some lenders will offer competitive interest rate to borrowers with good cash flow and large transactions.
Maximum limit for a commercial full doc loan
Though up to 30 yrs is allowable, most commercial loan lenders limit it to 15-year terms with a sizeable of them permitting 20 to 25-year terms.
-
No doc loans
A handful of lenders in Australia as still offering Commercial No Doc Loans despite their great risks shown after 2008 financial crisis. Fewer regulations are placed on No doc loans. Thus, it’s not a requisite to verify borrowers’ income under law. In the real sense, the term no doc doesn’t mean ‘no documentation’ but implies ‘less documentation’ needed.
Commercial properties applicable
Multiple property securities can be utilized to secure no doc loans. Such properties include:
- Retail property
- Residential property
- Commercial property,
- Industrial property,
Difference between No Doc Loan and Low Doc Loan
No doc loan: on the affordability declaration, income disclosure is not required when acquiring the loan. A borrower needs only to assure the lender that he/she can afford the loan without proving projected income or expenses.
Low Doc loan: a borrower has to declare his/her income to gauge affordability of the loan. Apart from that, accountant’s letter and business activity statements may be needed to verify income earned before the loan is disbursed.
A No Doc Commercial Loan maximum loan term
No doc loans are more flexible than full doc loans. Others may offer 1 to 3 years loan term while others would offer 25 years term period.
-
Commercial Lease Doc Loan
Lease doc loan is a loan that a lender advances based on lease income that an industrial property or a commercial generates. Incase rental income is strong enough to exceed overall interest payments for 12 months period; the loan will be approved without any financial statements.
Types of property security
Only 3 types of securities are applicable:
- Industrial property
- Retail property
- Commercial property
Minimum interest cover for lease doc
The required minimum to access lease doc 1.00 times cover. Some lenders may prefer a high minimum interest cover of either 1.25 times or 1.30 times. An interesting cover of more than 1.00 times (a positive interest cover) is achievable when the income generated is more than or equated to interest bill.
Maximum lease doc loan amount applicable
For most lenders, borrowers can get a maximum of $4,000,000 as lease doc loan although the amount varies amongst different lenders.
Loan terms applicable
Loan term of such a loan is dependable on the lease term. Some lender set renewal lease terms of 5,15, or 25 years.
Affordability
These loans types are not very expensive, and in some cases, they are priced at par with full doc loans.
