Commercial Loans and Home Loans: How Do They Differ?

Small businesses may start in one’s kitchen, extend to the garage and then grow even bigger in the backyard. However, to eventually grow even bigger, a small business needs to invest in a place they can call their own and exclusively for the business. To be able to do so, even without investing a lot of capital into it, a commercial loan is necessary.

However, a commercial loan is different from the other types of loans. To give you an idea, read further:

Commercial Loans vs Home Loans

It is important to know the difference between a commercial loan from a home loan. Generally, the key differences can be identified through the following areas:

• The amount you can borrow
• Lender’s Mortgage Insurance
• Loan periods/loan term
• Pricing and interest rates
• Higher fees
• Bank reviews

How Much Loan Can You Borrow?

More upfront cash will be required when you are borrowing for a commercial loan compared to a home loan. In a home loan, you can borrow as much as 95% of the property’s value, however, when applying for a commercial loan, you can only get as much as 80%. This is also strictly true for single-security deals. These are loan amounts up to $1 million. Applying for a higher amount will require you to prepare for a higher deposit because your LVR goes anywhere below 75%. For some banks, the highest LVR is 70% for commercial loans above $1 million.

To make it short, this is the amount you can borrow for commercial loans

• 100% of the property value using a guarantor to secure your loan
• 80% of the property value for loans up to $1,000,000
• 75% of the property value for loans up to $2,000,000
• 70% of the property value for loans up to $5,000,000
• Commercial property loans from $5,000,000 to $50,000,000 are on a case by case basis

Aside from the lender, the type of commercial property loan and the nature of your security will have an effect on the amount that you can borrow:

• If a residential property is used as security, you may be able to borrow 100% of its value.
• Lease doc, low doc, and no doc loans will require a larger deposit.
• Specialized security properties will require a larger deposit.
• Security for a commercial property loan

No Lender’s Mortgage Insurance

Lender’s Mortgage Insurance does not exist in commercial loans. LMI is only applicable to home loans that do not have the required 20% deposit. To understand what a Loan Mortgage Insurance is, you can head to this article How to Use and LMI Calculator. - https://www.intellichoice.com.au/how-to-use-an-lmi-calculator

Shorter Loan Payment Term

Home loans have varying loan terms and can go as long as 30 years. Smaller commercial loans are paid in shorter time frames. For a construction loan of $1 million, you can get a 15-year or 20-year term to repay the loan principal and the interest. As loans get larger, they can generally be applied with a three-year term, although not fully amortized in most cases. It can be a three-year-interest-only term in some cases.

Pricing May Vary

Home loans are very straightforward when it comes to interest rates. Commercial loans are quite different. You will undergo several ranges of criteria that could affect the interest rate that will be given to you by your bank or lender. Risk metrics that can affect the interest rate that will be applied to your commercial loan are as follows:

• Location of the security property.
• Diversification of the property portfolio.
• Condition and appeal of the security property.
• Current and future state of the local property market.
• Level of interest cover (ability to repay the debt).
• Loan to Value Ratio (LVR).
• Length of time until the lease(s) expire.
• The strength of the tenant(s).
• Asset position of the borrower.
• Management experience / track record

Higher Rates and Fees

Compared to home loans, interest rates are considerably high for commercial loans. Interest rates also tend to be higher for businesses or properties that are considered riskier than other commercial operations.

How to Apply for a Commercial Loan?

Commercial loans can be complicated, thus, it would be necessary to get help from a professional to make the process easier. Intellichoice can help. Call us today at 1300 55 10 45 to learn more or visit our website for more information. 

Getting By This Pandemic With Invoice Finance

The aftermath of the recent pandemic has left many businesses in uncomfortable positions. Invoice finance is just among the options that entrepreneurs should look into to recuperate their businesses and avoid closing down. 

Unfortunately, with all this happening, some entrepreneurs are left with no choice but to explore options that are as drastic as firing employees or even downsizing just to stay afloat. 

With proper research, businesses actually don’t necessarily have to experience unnecessary distress as there are options that they can explore that don’t entail firing people to the very least. 

That’s where business loans come in. In particular, invoice finance is just one of these options that entrepreneurs can consider at this time of high uncertainty. 

Businesses that reach at least 3-5 million annual turnover, invoice finance can give them economic relief and stay in the business for the time being.  

What exactly is invoice finance?

As previously mentioned, it is a business loan that entrepreneurs who experience financial woes can avail of. It is a form of debtor finance that primarily aims to increase cash flow of a company without resorting to high-interest mortgages and the need to tie in a lot of directors' assets. 

While many consider this as a loan, it is technically a financial alternative that provides financial relief to businesses who have troubles staying afloat. It is also ideal for businesses who want to increase their cash flow.

How does it work?

It is undertaken by companies to increase cash flow by selling their receivable sales (invoices) to factoring or debtor companies on a discount.  

It is a form of financing that primarily targets businesses that experience economic problems related to their operations. 

This can also provide financial relief a means to finance important business operations related expenses from salary to day-to-day expenses of the business 

To avail, businesses can take out a loan with their receivable cash from issues invoices as the security. Upon submission of the required requirements, the company can have these issues invoices into cash within a day or two--depending on the lender. 

Since this facility primarily aim to address immediate finance-related concerns of small to medium-sized firms, the turnaround time is usually faster than other loans. 

###

Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a broking firm based in Brisbane. He's been providing financial and broking services in the past 18 years. Hindmarsh is also finalist in the 2020 Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. To jumpstart your home loan application, visit their home loan online application page today!

A Beginner’s Guide To Personal Loans

Personal loans are specifically designed to finance personal expenses.  It is popular among people looking at loan products to consolidate their debts. It can be used to finance different personal needs such as purchasing a car or cash to cover medical or educational expenses, among others.

Common types of personal loans include Car loans and Lifestyle loans.  Personal loans can be secured—requires the need of collateral to secure the loan—or and Unsecured—does not require a collateral, which can include real estate property (house and lot or land) or vehicles (cars/tractors/equipment).  

Why should you get personal loans?

The application process is easy, and some lenders can render same-day approval. It is a good way to get cash for various personal expenses-including consolidating his multiple credit card debts and his personal loan--and just one pay one loan instead.

One can also use personal loans to finance his personal expenses such as health, education, and even travel expenses, among others.

Other purposes of personal loans

Personal loans are a good option if you intend to consolidate multiple debts into one—for convenience purposes.  A source of cash to finance other personal expenses.

Who should get personal loans?

Only those who are in dire needs of cash for personal expenses that need immediate funding should get a personal loan. It’s easy to fall into a debt trap with personal loans.

Since many people fall into a debt trap with personal loans, only those with a stable and continuous source of income should get this loan or any other loan type for that matter.

Anyone looking at consolidating their debts into one loan

Personal loan process

Eligible applicants can directly go to lenders, but this gives him few options in terms of interest rates. Lenders differ on their requirements and interest rates, so it’s preferable to check with a specific lender that specialises in personal loans for better results.

That’s where Intellichoice Finance comes in, we specialize in personal loans and we have lenders that have been dealing with clients with successful personal loans applications in the past 18 years.  

###

Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a Brisbane-based mortgage broking company that was established 18 years ago. He was shortlisted as a finalist in the 2020 Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. If you want to jump start your home loan application, please our online home loan application page today! 

How To Grow Your Business With Invoice Finance

Starting up a company can be a real challenge, but growing it is a whole lot different story. With today's economic atmosphere, knowing your options can make a huge difference, and one of these is going for invoice finance. 

Most business go for invoice finance for several reasons--making a business afloat and increasing its cash flow, among others. 

Invoice finance is a common option undertaken by many businesses and a necessity for most once they achieve turnovers greater than 3 to 5 million.

With thousands of business shutting down its doors as the global pandemic hit the entire world early this year, many are struggling to survive. So why should enterprises even consider invoice finance?

It is a form of debtor finance that primarily aims to increase cash flow of a company without resorting to high-interest mortgages and the need to tie in a lot of directors' assets. 

Although technically it is a type of loan, but more a financial solution often undertaken by companies to increase cash flow by selling their receivable sales (invoices) to factoring or debtor companies on a discount. 

An invoice, in its simplest term, is a commercial document that stipulates the payable amount value of the services rendered or products sold by a company to its clients. 

While invoices document incoming sales to a company, this cannot be considered like that of a dispensable cash unless payment has been made. 

So if you're an entrepreneur and you're running a business in this time of high uncertainty, you might want to consider this highly viable option for your business to thrive. 

###

Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a Brisbane-based mortgage broking company that was established 18 years ago. He was shortlisted as a finalist in the 2020 Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. 

Intellichoice Finance’s Darin Hindmarsh Finalist In AMA 2020 Specialist Lending Awards

 

The Australian Mortgage Awards, the most prestigious mortgage award-giving body in the mortgage sector in the country, named Darin Hindmarsh as among the finalists under specialist lending category. 

Among numerous nominations from brokers and mortgage practitioners from all over the country, Hindmarsh has been shortlisted in this year’s Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. 

Hindmarsh is the CEO and founder of Intellichoice Finance, a Brisbane-based company he established some 18 years ago. 

His story of tragedy, personal struggles, and professional challenges did not damp his spirit to continue what he started. Carrying those experiences with him, he persevered to rebuild his broking firm a year ago to its former glory. 

 

With his almost two decades of industry experience, Hindmarsh continues to help Australians fulfil their dreams of living in their own house. Staying true to its name, Hindmarsh’s Intellichoice encourages its clients to make intelligent choices in making their dreams come true. 

Intellichoice Finance is a broking firm in Brisbane, Australia that specialises in personal finance, particularly owner-builder loans. To know more about their services, you visit their website today.

What is debtor financing?

Read this article on debtor finance or invoice financing and how it can help your business:

https://www.intellichoice.com.au/find-right-invoice-finance

Small business finance scrutinised

The Senate Economics Reference Committee has found that small business finance has tightened over the past couple of years and become more expensive. However, it concluded that a return to more prudent credit conditions was appropriate. It was more concerned with what it saw as restriction on competition, particularly exit fees on business loans and the high cost of moving accounts.

It recommended that banks abolish exit fees on variable rate mortgage loans. It also recommended that the Australian Bankers Association work with small businesses to develop a code of practice for lending to small businesses. It includes a proposal to extend to small business the protection currently available to consumers.

Such a change would mean small business would have ASIC acting as a watchdog over exit fees. It would also give small businesses better access to mechanisms for negotiating with mortgage lenders when they are in financial difficulty and it would impose responsible lending obligations on small business lenders.