Empowering Business Owners with Strategic Financing Choices 

Introduction 

Commercial loans are not one-size-fits-all; they are customizable based on the unique needs and goals of business owners. This guide delves into the dynamics of commercial loan terms, exploring the benefits of both short and long terms, considerations for different property types, and the potential for maintaining business banking independence during the financing process. 

1. Commercial Loan Term Variations 

Tailoring Loan Terms to Property Types 

• Residential or Commercial Property as Security: Up to 30-year terms available, especially when residential property is used as security. 
• Standard Commercial Property (Freehold): Terms range from 10 to 25 years. 
• Property and Business (Freehold Going Concern): Similar terms as standard commercial property. 
• Purpose-Built Commercial Property: Typically 10 to 15 years, but some lenders may offer up to 25 years. 
• Interest Rate Terms: Fixed, variable, split rates available. 
• Bank Bill Swap Rates (BBSY): Terms of 10, 15, 20, and 25 years. 
• Redraw and Extra Repayments: Redraw allowed for prepaid amounts, and unlimited extra repayments with no fees after the fixed period. 

2. Strategies for Longer Loan Terms 

Maximizing Borrowing Power and Cash Flow 

• Buying Standard Commercial Property: Opting for standard commercial properties allows for longer loan terms. 
• Using Residential Property as Security: Residential property as collateral can extend loan terms up to 30 years. 
• High Loan-to-Value Ratio (LVR): Even with a high LVR, qualifying for a 30-year term is possible. 
• No Residential Property: Some lenders may offer 25-year terms with an interest-only period. 
• Interest Rates: No higher interest rates charged for terms exceeding 10 or 15 years. 

3. Benefits of Longer Loan Terms 

Enhancing Cash Flow and Borrowing Power 

• Business Investment and Expansion: Leveraging equity for future business growth or property investments. 
• Reduced Monthly Commitments: Smaller repayments increase cash flow, meeting bank serviceability requirements. 
• Sustainable Business Planning: Refinancing to interest-only periods to strategically manage cash flow. 
• Borrowing for Non-Business Property: Longer terms increase borrowing power for additional property acquisitions. 

4. Advantages of Shorter Loan Terms 

Accessing Equity, Refinancing, and Interest Rate Benefits 

• Faster Loan Paydown: Accessing more equity for investment and refinancing at lower rates. 
• Interest Savings: Paying off the loan quickly minimizes interest expenses. 
• Interest-Only Period Considerations: Evaluating cash flow and repayment capabilities post-interest-only period. 

5. Frequently Asked Questions (FAQs) 

Addressing Common Queries 

• Commercial Loan Without Switching Business Banking: Strategies to avoid the requirement of switching business banking. 
• Prepaying Interest: Some commercial loan products allow prepaid interest for up to 12 months. 
• Benefits of Bank Bill Swap Rates (BBSY): Potentially cheaper rates linked to the Bank Bill Swap Rate. 
• Commercial Loan Assistance: Guidance from senior mortgage brokers specializing in commercial property loans. 

Conclusion: Strategic Financing for Business Growth 

Understanding the nuances of commercial loan terms empowers business owners to make strategic financing choices aligned with their objectives. Whether opting for shorter terms to pay down loans rapidly or leveraging longer terms to enhance cash flow and borrowing power, informed decisions contribute to sustained business growth and financial success. Seeking professional guidance ensures a tailored approach, unlocking the full potential of commercial financing.