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 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.
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.