COMMERCIAL PROPERTY FINANCE rates and fees are much more fluid than those associated with residential loans.
To get the best deal, you should know what the banks look for and consider the other factors that go into pricing for commercial loans. The following ways may assist you in securing better pricing for your commercial loan.
What Can You Bring to the Bank?
Banks earn a large portion of their income through the interest on loans. But they also value other forms of business.
If you provide more business, in addition to loans, you will generally receive better pricing — because you are considered more valuable to the banks.
In addition to your loan, consider using the bank for other products and services such as:
- Term deposits
- Credit cards
- Leasing facilities
- Trade funding
- Bank guarantees
- Trading accounts
- Personal loans
While I advise you to use caution before moving all your banking to one bank — it is worth looking at the pricing benefits of bringing more of your business over to the institution that you are seeking a commercial loan from.
Provide Enough Information to the Bank
You may be understandably reluctant to provide all of you financial information to lenders and want to look for facilities that do not require this. But this will cost you in the long run.
Remember — commercial loans are priced for risk, so the object of a loan submission is to make the case for you being a low risk to the bank.
If you are able to provide full financials, it will invariably result in a better pricing for your loan.
Build a Relationship with Your Bank
You may be frustrated with your bank, for good reason. But remember that they are necessary partners for any property investor — particularly Commercial property investors.
When you take out a commercial loan, the bank will, typically, allocate a relationship manager to you.
Building a good relationship with your manager is a good idea because you may need their assistance at some stage down the track.
While banks are self-interested institutions on the whole, personal relationships still matter deeply. In business banking and commercial finance — the “old school” style of banking still largely applies.
The job of a credit analyst is much easier if you present information in an organised and easy to read fashion.
If you are using a broker, they will also find it a lot easier to present a strong submission for your loan.
Test the Market
It is important for you to understand what is out there in the market. And this is a compelling reason to use a trustworthy broker because they have knowledge of the market. They will ensure that you get the best pricing possible.
A word of caution: You should do some research into what sort of pricing is available among competing banks. But do not make multiple loan submissions — or it can result in multiple credit inquiries that will negatively affect your credit score.
Also, deals that have been “shopped” extensively tend to have an automatic black mark against them when assessed by credit officers.
So test the market, but do not go too far with it.
BOTTOM LINE: Keep the above points in mind to ensure that you have the best chance of securing the appropriate loan for your circumstances and to minimise the costs associated with your finance.