Commercial or Business Loans

November 8, 2017

Commercial loans or business loans are the primary source of funding when you need the money for a term longer than one year. The debt can be secured by traditional residential or commercial property, “non-traditional” assets as well as the business itself.

 

The interest rate used in loan is based on a number of bank based matrices, including the type of security provided, the purpose of the loan, and the source of income used to service the loan.  The bank's cost of fund as well as their existing loan book also affects the interest rate and of course, the customer's negotiation skills! 

 

There’s no such thing as a “standard” commercial loan as almost all business bank transactions are analysed case by case.  That said, there are some common features that all business loans have:

  • Terms of business loans are typically between 1 and 15 years

  • Interest only terms are usually limited to no more than the first 5 years

  • Interest rates can be fixed or variable but some offer more complex interest rate hedging strategies

  • Typically, most loans don’t offer loan offset accounts

You can make an extensive list of purposes that this type of loan can provide funding for including:

  • Commercial property purchase

  • Business acquisition

  • Working capital funding

  • Construction / development

  • Premises renovations and upgrades

  • Asset purchases

Each bank has its own speciality and many have a niche in which they do better in. Different banks at different times have preferred security as well as preferred purposes for the loans they fund. If you would like Just Business to do the homework for you, feel free to call us directly for a no obligation consultation.

 

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