Commercial lending involves the financing of commercial properties and/or the refinancing of commercial loans.
Commercial loans finance properties such as:
Whilst many of the basic residential policies also apply to commercial lending, there are also many commercial lending policies that are unique to commercial lending, i.e.
In the main, the interest rate charged is made up of a base rate, i.e. a wholesale rate, e.g. BBSY plus a risk margin. The lender determines what risk grading you as a customer represents and then adds that to the wholesale rate. Saying this, there are a number of lenders that give the same commercial rate regardless of what risk you represent to the lender .
Generally commercial rates are slightly more expensive than residential lending rates, this interest rate premium can be anywhere from 0.25% to 3-4%.
Commercial lending establishment fees can be far more expensive than residential fees. An application fee of 0.5% of the loan amount is common. Due to competition some lenders may just charge a nominal fee of $500. The lender will also pass on the fee they have incurred to value the property. The valuation can be thousands of dollars. The more expensive the commercial property, the more expensive the valuation fee.
Other fees that may apply include
A word of warning – the cheapest rate may not always be the best option to go for.