Category: Articles
Tags: Commercial

Business Equity Loan

If you use residential property as security, you can access more favourable interest rates for business loans. While most financial institutions will refer you to business banking and charge you a higher rate, some lenders can consider giving you the discounts normally reserved for home loans.

Borrowing 100% as a business loan

If you are using your home as security and are putting money into an existing business, you may be able to finance up to 100% of the value of your property as a business equity loan.

Example: A business owner has a home valued at $900,000 and has a home loan for $450,000.  If his business is profitable and he can prove that the loan will be used for a sound business purpose, up to $450,000 may be accessible as a business loan.IMG_1168

This is effectively borrowing 100% of the value of your property.

Borrowing the full cost of a commercial property

Yes, you can as long as you have additional security for the loan.  Normally this is the investor’s home or an investment property.

Example:  An investor wishes to purchase a commercial property that is worth $1,000,000 with no deposit.

However, they own a residential property worth $700,000 with $250,000 remaining on the loan.  Lenders will potentially allow the $450,000 equity in the residential property to be put towards a deposit for the commercial property.

This increases the Loan to Value Ratio (LVR) on your residential property, bringing it to 100% of the value.  The remainder of the funds may then be borrowed read more…