The Latest In Commercial Mortgages in NZ

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Commercial mortgage for warehouse

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For a few years after the Global Financial Crisis, applications for commercial mortgages in NZ dropped considerably. However, in the last couple of years, activity has increased again. However, commercial lending institutions of all types are much more cautious about the projects and teams they will lend money to.

Lender caution

The biggest impact of the GFC was that lenders of all types, whether commercial or consumer, became extremely cautious about lending money. The tightened up their lending criteria for the types of project they would consider financing. The due diligence on borrowers became more stringent too.

As a result, many commercial building and investment projects could not get off the ground.

This was apparent in the number of unsold commercial buildings in Auckland.

However, in the last year or two lenders have been more willing to make loans for commercial property investment as borrowers have sorted out their Balance Sheets and lenders, especially banks, have had more cash to lend. Obviously, if a lender does not make loans, then they do not make any income.

Types of commercial mortgage lender in NZ

In fact, many commercial lenders closed shop post the GFC. Clearly the major banks stayed in the market but they were among the most rigid in setting new criteria for loans.

A number of second tier commercial loan companies and some private lenders withdrew or even went out of business. This made it even more difficult to get commercial mortgage financing.

This was especially the case for certain types of investment project. The banks have always been more cautious than other lenders but it was generally possible to find an alternative finance source if the project was financially viable.

Current situation for commercial mortgages

For the remaining lenders, the applications for loans are at extremely high levels.

According to the NZ Herald, there is a shortage of retail space available in the Auckland. That shortage is then reflected in the high demand among investors to buy retail space. As a consequence, the demand for applications has been huge, and some lenders are even being overloaded by the uptake in desire to invest in commercial and retail properties.

One trend in commercial lending is to look at larger commercial, industrial and retail purchases. This gives solidity to the loan portfolio of the banks and other lending institutions who like to spread their risk. The argument being that larger and therefore more stable companies are those who lease larger premises.

xedos4

xedos4

Commercial mortgage lending patterns

As a broad view, lenders are more willing to consider commercial mortgages providing that the prospective borrower can meet certain lending requirements. These include a good credit track record, sound commercial leases in place for the property, and strong management from the borrower. The quality of the borrower has always been important but these days this is even more of an issue.

As there is this renewed desire by financiers to lend money, borrowers are in a good position to negotiate terms that can help their investment. For sure, lenders are experiencing high demand for mortgage loans but at the same time, they are keen to invest their funds in projects that can give them a good but sound return.

Where to source commercial mortgages in NZ

Given all of the above, the high demand, the tighter constraints and the change in lending sources, it is difficult for most investors to find the best commercial mortgage sources. This means that it is easier for investors to work with a commercial mortgage broker who can assess your investment plan and then match it to likely lenders.

The broker has wide ranging experience of many different commercial investments and so can use that knowledge to give a rigorous assessment of your intended purchase. They can review the leases, although you must seek legal advice to fully review any lease arrangements. The broker can then see what type of lender might be interested in your project. Finally they can also negotiate terms for the deal to suit both parties.

So if you have a robust project plan with sufficient leases and deposit in hand, then borrowing for commercial mortgages in NZ is much easier now.

Construction Loan Financing For A New Home

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Construction Loan Financing Helps People Get A New Home

When people are trying to build a new home or a commercial building such as a warehouse or office, they need to realise this is quite a bit more expensive than they might think. The reasons for self build are many and varied but one thing is for sure, the cost will usually be considerably more than initially anticipated. However, building a new home may be the only way that people are going to be able to get their dream home. This is when people should know more about the construction loan financing and how it can help them getting the home built. Construction finance is quite different from traditional mortgage finance so without this type of funding, people will have trouble in getting to enjoy their new house or commercial building.

Construction Loans Help With Block Preparation

Finance for construction loan NZ

Finance for construction loan NZ – image Salvatore Vuono

Getting the sub-division or block of land ready for the home or building is often one of the hidden expenses that people do not think about. This primarily involves having the water and electricity utility services supplied to the border of the block of land or to the individual section shown in the land title. However, the lot preparation is also the main cost outside of the actual home itself. The problem is a lot of people are not even aware of what goes into getting the site ready, but once they learn about it they see why this is so valuable.

As part of getting the lot ready people will have the driveway put in, the water lines will be tapped, septic or sewer is installed, and the electricity will be set up. Each of these are going to cost quite a bit of money, but with the driveway preparation this is a cost that people are typically shocked at since they have to get the gravel or other items they are using to make the driveway. However the cost is extremely high so be prepared for a shock. This article in the NZ Herald gives some typical costs for bring utilizes to a bare block of land in Auckland.

Electric and the water taps are generally a lot less in cost, but even these can cost quite a bit of money. However, the main expense in these aspects is going to be the cost of getting the line back to the house site and getting the lines ready to be connected into the home.

Purchase Of The Materials

Depending on the type of residential construction loan the financing may cover the actual purchase of the materials to build the home. Normally the materials, if they are bought separately do not cost a fortune, but obviously this depends on the size of the home as well.

The supplies that are typically bought are sufficient to build the walls whether it is brick, wood or some other material, the wiring, plumbing, and even the roof of the home. However, you do not need to buy all of the materials in one big purchase. Obviously you will not need the roof material from day one.

Hiring Of Contractors

This is one of the most important aspects of a construction project. The hiring of the right contractors is crucial since they can build to schedule and budget or, more likely they will blow out both. This will cause major funding costs both in terms of needing additional money and also interest payments since the project goes beyond budgeted costs. The labour costs are likely to be the biggest total expense in the whole building project.

Another key aspect in hiring a reliable construction firm is that they will complete the project to the latest building code. There is often a temptation to cut corners but without the contractors people may get the structure built, but it may not be able to pass any of the building codes which will incur further costs. So the construction loan is going to help people afford to hire the professional contractors who can help them in getting their home built up to code.

If you are looking for construction loan finance in NZ, then you may want to look at this company. Global Pacific Ltd is among the bigger independent financing providers in Auckland and has access to many different sources of money even for residential construction financing.

Having the chance to build a new home can be exciting, but it can also be a challenge because of the expense that is present. Since a new home is so expensive to build a lot of people will get a construction loan. The issue that comes up is people do not know what all construction loan financing is going to cover. By knowing this information, it is easy for people to find out if this is the best type of loan for them or not.

Different Options For Property Development Finance

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Different Options Available To Finding Property Development Finance

In recent years developers have found it challenging to access funding in order to finance property development projects. This is generally due to the reluctance of banking corporations to lend money for refurbishments and new constructions. Banks have become very cautious about lending to developers especially those with little or no experience.

Finance for property development projects

Funding for redevelopment projects is usually calculated by estimating the increased value of the development and then borrowing against that forecast. Funding can be released in various ways including as staged payments over time or on completion of pre-agreed stages in the project. An individual may obtain finance for a proportion of the loan to value however this will depend on the details of the project, the developer’s experience, the location and the nature of the project. This article will provide details on the different options available to financing property development projects.

1. A senior debt loan

Before seeking out property development finance you must determine what form of property finance you will be undertaking. A senior debt loan is recommended for residential and commercial projects as it covers between 60% and up to 80% of the property development loan value. This can be arranged against the gross development value with additional security and all interest payments may be deferred if necessary.

The senior debt loan takes its name from having seniority in the issuer’s capital structure, unlike a subordinated debt. This means that if an issuer should face bankruptcy the debt must be repaid before any other creditors (except the IRD and the liquidator) receive payment.

2. A mezzanine finance

Property development financing

Property development – image khunaspix

The mezzanine finance is also known as a second-charge loan or subordinated debt, which is placed beneath the aforementioned senior debt loan. This type of loan (the mezzanine finance) is similar to a short-term bridging loan as it enables financial funding of a construction project while the developer’s capital is invested elsewhere. Unfortunately this makes the loan a greater risk with high monthly interest rates, but the loan can represent values of up to 90% or 100%. The mezzanine loan is most suited to refurbishments and renovation projects.

3. Joint venture finance

One advantage about a joint venture financing option is that the project developer can obtain 100% funding for the construction. Of course, how the joint venture is set up is completely dependent on the development you are looking to complete. A legal document is drawn up to indicate how much income will be shared between individuals which alleviates any confusion between developers and financiers. It will also indicate who is liable for which project costs and what profits will be shared. The joint venture finance option can be used for almost all construction projects.

4. 100% property development finance

In some cases you may be able to negotiate bridging rate finance options without any need for profit sharing. One example of this includes situations where you already own the land; another instance is when you have a good relationship with the expert lending partner.

How to obtain the best property finance deal

Finding the best finance deal in today’s touch economic climate can be difficult however there are some steps one should follow to have a better chance. Firstly, always present a portfolio of successful developments as banks are more likely to finance ‘safe choices’. If you already own the land there is a greater chance you will receive planning consent as you already hold the title. Finally, by showing that the development will have a strong rental demand or there is a good exit strategy at the end of the project, there is a better chance of a loan.

Final words on the matter

Property development finance broker

Property development finance broker

There are various options to find funding for property development and each of them operate in different ways. If you have an understanding of each of these funding methods you will be able to navigate the financing of your construction project. However, even a brief glimpse into the world of property development finance is better than nothing. But, you must still talk to professionals, legal, accounting as well as financiers. Do not sign any documents until you have had thorough discussions with your lawyer and accountant.

Global Pacific is a leading player in the property development financing market. Look at their website to get some background and then talk to one of their financiers. The go and talk to your professional legal and accounting advisers.

Why You Need A Commercial Finance Broker

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DebtIf you have been in business for any period of time, then you know about the need of finance for business expansion. This might be for a lease on a new premises, replacement or additional plant and machinery, or even buying a suppler or competitor. Whatever your need might be, then you are also aware of the challenges in getting commercial finance. Banks in particular are nervous about lending money so it is even more difficult for a business to get the funding they need. A better option than facing multiple rejections from the regular banks is to talk to a commercial finance broker.

Many people are not even aware of the existence of finance brokers and may wonder what they do and how they can help companies looking for finance.

In short, a commercial finance broker plays an important role in assisting business owners in acquire the finance that they require to expand their company. This broker’s job is to bring together commercial lenders and borrowers for all forms of borrowing whether it is short-term or long term finance, loans. Leases, mortgages and many other types of funding vehicle.. Similar to any other type of broker, a commercial finance broker gets paid a fee based on the size of the transaction. Sometimes there is a retainer paid by the borrower but usually it is a percentage of the total monies paid on completion of the project.

Since few people need to raise finance for a business on a regular basis, they are unlikely to Commercial finance broker NZpersonally know a broking firm so they will search online for finance brokers. You will quickly find a lot of potential business finance brokers so you need to select the one best suited to your requirements. But how do you know if a broker will be good for you? The following points will help when looking for commercial brokers:

    • Look for an experienced finance broker; you don’t want to be someone’s learning process. A consultant with at least three years of experience should be able to provide you with the service you need. Also look for someone who has experience in either your industry or in the type of finance you need. So if you want a lease rather than a mortgage, go to a commercial leasing specialist. Bigger finance brokers like Global Pacific Finance in Auckland, have experience across many different financing methods.
    • A broker is only as good as their network so look for one who has great connections with a range of lending institutions. Look especially for those that are actively working in the small business market and your type of industry. They will have better knowledge and experience to make your deal happen.
    • A good broker does more than connect lenders and borrowers. They will also be able to get a good understanding of your business too. They will study your financial reports to get a flavour of your financial situation which means they can refer you to the more appropriate lenders.
    • Finance brokers will help you to write a business plan and present it in a way that the will resonate with the target lender. Just like each borrower has different needs, each lender likes to work with different types of projects, or more importantly, does not like funding certain activities. Your broker will know this and will save you time by introducing you to those that are more likely to look favourably on your industry or finance project. They can also help in drafting the loan application.

  • A broker worth his salt will generate a credit report at the beginning of your hunt for finance. If there is a problem with your current credit then it will determine the next steps. Just because your credit score is not perfect that does not mean you cannot get funding. It simply means you will need to talk to different lenders. A really good broker might also be able to advise on how to make adjustments to your credit history before submitting the application.
  • A finance broker will work closely with you to bring about your deal. They will provide support, advice and help to negotiate the terms of the deal so that it meets your own requirements.
  • Their knowledge and experience will save you a lot of wasted time.
  • Finally, since this will be a transaction between people it pays to work with other people that you get along with. You will be giving confidential information to this person so you want to know you can trust them and that they will be working hard for you.

Another point to bear in mind is that finance brokers are paid a commission of the total deal. Sometimes there may be a fee to retain their services but on most cases, they are solely paid from the commission at the conclusion of the arrangement. A good business finance broker will not ask for any kind of upfront fees.

Summing up

Clearly, the choice of a commercial finance broker is an important one as the outcome can have a great effect in your business. Research deeply and widely before committing to any particular broker. This is a good place to start on this site.

Finding a Commercial Mortgage Broker

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Why You Need to Find a Commercial Mortgage Broker

If you are a commercial property investor or when a business wants to acquire, refinance or redevelop a property they’ll need to obtain a commercial mortgage. While this is something you can do on your own, you stand the best chance of getting a good rate and term when you use a commercial mortgage broker.

Commercial mortgages are mortgage loans that are secured by a piece of commercial property. This generally but not always will include the property being acquired by the loan. Commercial properties can include industrial or commercial warehouses, office buildings, shopping centres, apartment complexes and private medical facilities among many others.

commercial mortgages NZ

Dollars for commercial mortgages

As with any type of loan, you want to get the best interest rate, terms and repayment options. Knowing how to compare the available commercial mortgage options takes time and experience. This is where a commercial mortgage broker can assist you.

The commercial mortgage lending process begins with your application. Your mortgage broker will obtain all of the information necessary to submit your application to several companies or even private individuals that are likely candidates. A mortgage broker is not a lender. They work with you to find potential lenders.

A commercial mortgage broker can advise you before you begin the application process of your chances of getting a loan. Generally the mortgage will be based on the debt service coverage ratio and the loan to value ratio of the property.

The debt service ratio required by most lenders is 1.1 to 1.4, this is the amount of income the property makes over the mortgage payment amount. For new properties or those under renovation the lender will look at the rents or costs per square metre. They will also consider the location, property use and the financial health of the commercial real estate market in the area.

The standard loan to value ratio for most commercial loans are 55 percent to 70 percent, which is much lower than residential properties. The loan to value ratio compares the amount of the mortgage to the total appraised value of the property.

Since many lenders may require a application fee, it’s best to first determine if you have a reasonable chance at successfully obtaining a loan. Generally these fees are used to cover the expenses associated with the loan process such as appraisals.

Your commercial mortgage broker can then assist in guiding you through the lender’s underwriting process. This process may include a review of your (or your businesses) finances, as well as, a financial review of the property. There will be various reports that need to be commissioned including appraisals, these can also be handled by your mortgage broker.

The due diligence a lender does on a commercial mortgage can include touring the site, environmental impact studies, engineering reports and background checks on the borrower. Many of these can be handled through commercial mortgage brokers.

The interest rates can be greatly affected by the information obtained during the underwriting process as well as the current market interest rates. These rates are usually much higher than residential mortgages and are available as a fixed rate or flexible rate. Your commercial mortgage broker can advice you on which type of loan would best suit your needs.

The terms for a commercial loan generally range between five and ten years for established commercial properties and one to three years for new properties or those under renovation. Multi-family properties may be eligible for government programs which can extend the term of their loans to thirty years. A knowledgeable commercial mortgage broker can assist you in determining which type of loan you are qualified for.

Your mortgage broker can assist you by ensuring you have options when it comes to your loan. They can obtain multiple quotes from qualified lenders, manage the application process and guide you to the mortgage is best for your business.

Commercial mortgage broker Auckland

Commercial mortgage broker Auckland

There are not as many commercial brokers as there are residential ones. Further they do not advertise in the mass media so they are less well known by the public at large. Sometimes the main banks will lend on commercial property deals but they have strict lending guidelines. Sometimes these restrictions will not allow the deal to go ahead.

In this situation a private ender or dedicated commercial financing company may be able to help. One of the biggest private commercial mortgage companies is Global Pacific. You can see more about them here www.globalpacific.co.nz. They have successfully arranged funding in numerous industrial, retail and office lending situations. Click here to get the ball rolling for you.

 

 

Finding Commercial Finance For New Zealand Businesses

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Options To Consider For Finding Commercial Finance For New Zealand Businesses

When you are trying to obtain financing for traditional types of property including homes, cars, or simply a piece of undeveloped land, as long as you have the proper credit rating, and the finances to fund the loan through gainful employment, it’s easy to get a loan for the property or vehicle that you want to buy. However, when you are trying to purchase something less traditional such as a campground, assisted living facilities or even a funeral home, obtaining a commercial loan for these types of businesses can be slightly problematic. Here are some tips on finding commercial finance options that are not only available, but affordable as well.

What Is Commercial Financing?

Commercial loan broker NZ

Commercial loan broker NZ

Commercial financing is simply getting a commercial mortgage, or a mortgage loan that is actually secured by a commercial piece of property. This could be something such as an apartment complex, a light industrial warehouse, a retail outlet or even an office building. There are many reasons for obtaining these types of properties including planning to redevelop the property, refinance an existing commercial mortgage, or simply purchasing the building as an investment. There are other types of commercial financing too such as plant, machinery, leases, companies or franchises. In short, major purchases by a business are likely to need commercial financing of some type.

Important Aspects Of NZ Commercial Financing

Commercial financing involves understanding a couple terms that are indicative of this type of loan. Some of the terms are also used when getting traditional mortgages or refinancing, therefore they might be familiar. The loan amount is determined by the LTV, or the loan to value ratios. The loan structure must be agreed upon, sometimes using what is called mezzanine finance. There will be interest rates, fees, and terms in regard to prepayment penalties and the length of the loan itself. Finally, these loans are usually amortised, which means the borrower will pay on both the principal amount and the interest that is owed.

Another key aspect, especially for buying commercial property is that the down-payment is higher than for a residential mortgage. Currently in New Zealand for a residential mortgage the banks require 20 percent deposit to buy a house. For commercial mortgages the deposit is often 35% or even more.

Another key aspect is the forecast cash-flow from both the project itself and the business as it currently performs. The lender wants to know if the borrower can afford to make the repayments on the loan.

Finding Affordable Commercial Finance Lenders

If the loan is being used to acquire another company the loan will be dependent upon the financial performance of the target company. If the new business owner is unable to conduct the business in a profitable manner, they may default on the loan.

It’s difficult to arrange this type of financing with some finance companies for this reason, and the type of business can also play a role in how easy or difficult it is to obtain this type of financing. If the lender does not understand the complexity is involved with special-purpose properties, or they do not believe that you will be able to keep the business running profitably, getting this financing may fall through. This can make it very difficult to get loans for the specialty properties or businesses.

Commercial loans NZ

Get the commercial loan you need

Another option for commercial finance is member-based organisations.  This one for example, can offer financing for a variety of business purposes including equipment and vehicle finance.

The easiest way to quickly find affordable commercial finance lenders is to search the web for commercial finance brokers who interact with lenders that specifically will lend money for commercial projects. Once you have found a broker that can connect you with commercial finance lenders, you should be able to get the money that you need to finance your project, or purchase the business that you want to acquire.

Finding commercial finance lenders is not that difficult, especially with the Internet. Your search should yield several brokers that will help you connect with lenders that are willing to help. Using these simple tips, you should be able to find commercial financing very quickly, and obtain the property or business that you want to buy for commercial purposes.