Commercial Lease Doc Loan

 

Commercial Lease Doc Loan

A commercial lease doc loan is NOT a full doc prime loan, however it usually offers one of the lowest interest rates in the commercial lending space.  Instead of providing business financials or full income documentation, you simple supply the lease agreement.  Whether the loan is approved or not, relies on the strength of the rent income used to secure your loan.  It's a great way to get your commercial lease doc loan approved.

Easier to administer than a commercial property loan as there is usually no declared personal income statement required or letters from the accountant.  Literally, the income assessment is based on the lease agreement income.  

Requirements

  • - You can borrow up to 70-80% of the property value.
  • - No need for tax returns, pay slips, bank statements, or business financial statements.
  • - Must be a commercial investment property.  The lease income must be sufficient to cover the interest on your loan.
  • - The lease should have 2 years left on the lease.
  • - The lease must be at 'Arm’s Length'.  Not your own company leasing the property.

  • There are plenty of lenders that can offer great rates on commercial lease doc loans.  Call me on 0423 237 242 or email matthew@mycommercialloans.com.au to see what's available for your scenario.

How do lenders assess the lease income?

The lender will look at a variety of factors:
  • - The length of the commercial lease; should be 2 years left on the lease or greater.
  • - The lender will ask questions around the strength of the tenant, whether they can be relied on to maintain their business and keep up with repayments.
  • - Each lender will look at the Interest Ratio.  This means they will want to lease income to be a bit more than the interest repayable on the loan (not the principle and interest payment).

What if I have just signed the lease agreement?

- Yes, although it does complicate the matter.  Lenders nearly always prefer a longer term tenant already in place.  However, they can look at each deal on its own merits.
- The lender will need the lease to be fully executed, and a bond paid before they will give the loan.

What banks offer lease doc loans?

- Westpac is a good one!  But there are many second tier lenders in this space that offer wonderful interest rates and terms.  It's best to give me a call so we can go through your scenario and make a plan of who may be best for your loan.
- If you have a 30% deposit for your commercial property, then there are usually a couple of lenders that would compete for your business.
Call me on 0423 237 242 or email matthew@mycommercialloans.com.au to find out which lender is best for you.

What commercial properties are acceptable?

As the lender doesn't look at your income or business when approving the loan, they will be even stricter on the kind of commercial properties they will lend against.  Your property should be:
  • - Standard commercial property.  This means non-specialised commercial including retail, industrial, office or warehouse.
  • - Should be located in a major metro or regional area.
  • - Not hard to resell based on "modification" to the property.

Owner occupied properties that most lenders won't consider

- Leasing a commercial property to your own business doesn’t count as income evidence.
- Leasing a commercial property to a family member’s business does not count as income evidence.
- Leasing a commercial property to a related business entity also does not count as business evidence.
- Most banks want to see a true arm’s length transaction.  If you're leasing the commercial property to a related party or enterprise, then consider a commercial low doc loan instead.  I can help you with both.

What is the longest commercial lease doc loan term?

- Usually, 30 years is the longest loan term.  However, the loan terms will vary between different lenders.
- Some lenders review the loan term in line with the renewal of the lease.
- Some lenders have set terms of 15 - 25 years.
- There are interest only options.
What interest rates will I pay?
- This may depend on the size of your deposit.  The lower the LVR, the lower the interest rate in general.
- If you have a small deposit, low interest cover ratio and a non-standard property is not ideal, you should expect a higher interest rate.
Please give me a ring to discuss if you need clarifying.

Why go for a commercial lease doc loan?

You would go a commercial lease doc loan over a commercial property loan because:
  • 1. You have a complex business financial situation.  Your tax returns aren't done, or you have multiple entities.
  • 2. Your personal financial situation is complex and just want to rely on the lease income to service the debt.
  • 3. You are self-employed borrowers with no income evidence.
      4.  You want a simple loan process that the commercial lease doc application provides.

Want to apply for a lease doc commercial loan

If you're ready to buy a commercial property and want to take the commercial lease doc option, then give me a call on 0423 237 242.  I will guide you on the process and help you apply with the most suitable lender.
Matthew Stack
0423 237 242
matthew@mycommercialloans.com.au
#commercialleasedoc #commercialproperty #commercialpropertyloans



Location: Australia

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