Businesses need money from time to time to fund their daily capital requirements, funding other obligations and loan payments, and expanding their businesses. Among the many business types, loans are unsecured business loans with a higher interest rate, a mortgage loan, or commercial property loans.
Why is the Commercial Property Loan the Best Option For Businesses?
Among the two types of business loans mentioned above, commercial property loans are preferred both by banks and individuals. This is the best option for both parties to the loan agreement.
For the Customers & Business Owners:
Business owners find it easy to take a commercial property mortgage from a bank or financial institution. This is because getting an unsecured business loan can be tough for businesses, especially new ones.
One reason is that they do not have a high turnover or profit parameters in their income tax returns that will satisfy the minimum eligibility criteria for the bank. In the case of a commercial property loan, the loan is secured by mortgaging commercial property rather than residential property.
For the Commercial Loan Lending Institutions:
Even loan lending institutions such as banks, NBFCs, and loan lending corporations make it easier to process the application as the commercial property on mortgage acts like insurance to the banks.
Things to Know Before Taking A Commercial Loan From A Financial Institution-
Any business organization needs to know a few things before agreeing to take commercial property loans. Since many banks and financial institutions are providing commercial property loan, you cannot just trust anyone. When it comes to choosing the one, you need to take into account the following parameters:
Interest Rates:
The interest rates will vary on your loan. Different financing space players, such as banks, NBFCs, and other loan lending institutions, will have their interest rates depending on their policies.
Also, generally, these institutions have a privileged interest rate for higher loan amounts sanctioned. This is generally for those customers who are taking higher loan amounts.
Find out the interest rates that the banks will charge you before taking commercial property loans in from any institution.
A Time of The Loan:
Another big thing for the business owners to give a thought to is the period for the loan. See, the higher tenure you go for, the more interest you must pay.
It is always better for you to go with a smaller tenure to ensure that the total interest you are paying over the term is as low as possible.
The banks will also have a say in this based on your profitability and income statements and the projections of your future income and revenue statements.
Finding Out the Value For Your Commercial Property:
Remember that during the processing of a commercial loan on a property where the property is mortgaged, the banks and lending institutions will do a physical verification of your house to determine the market value.
It is always good to opt for an inspection of the property. You can hire a commercial real estate broker for this work. They will help you to know the valuation for your property and find out the appropriate loan amount.
Banks and financial lending institutions do not generally give you a 100% loan of the valuation but generally agree to a 70-85% of the valuation.
Loan Processing Fees & Other Charges:
Banks and financial lending institutions will also charge you processing fees and some other charges. Make sure to find this out and know how much the final amount will be credited to your account for commercial property loans .
Conclusion-
In the above section, we have informed you of some important parameters that you need to keep in mind for getting commercial property loans. Make sure that you thoroughly assess all the important parameters before making the final call.
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