Obtaining Commercial Loans

[John M]

Hi everyone,

I'm an Industrial and Commercial Property Sales and Leasing Consultant in Western Sydney and have seen a considerable number of sales fall over in 2012 due to the inability to obtain finance. Banks are wanting low LVR, instructing valuers to value property significantly lower than their actual market value, wanting ridiculous existing lease terms on the property etc etc which makes it very difficult for investors and owner occupiers alike who are looking to purchase.

I'd love to hear what experiences people from this forum have had obtaining finance for commercial & industrial properties and if you found any particular bank more reasonable than others?

I have heard from a couple sources that the Bank of Queensland has helped them out where various other banks have turned their back on them - I'm not sure if this is applicable across the board or if this was simply due to their individual circumstances.

Thanks
Jonno

 

[Rolf Latham]

Hi everyone,

I'm an Industrial and Commercial Property Sales and Leasing Consultant in Western Sydney and have seen a considerable number of sales fall over in 2012 due to the inability to obtain finance. Banks are wanting low LVR, instructing valuers to value property significantly lower than their actual market value, wanting ridiculous existing lease terms on the property etc etc which makes it very difficult for investors and owner occupiers alike who are looking to purchase.

I'd love to hear what experiences people from this forum have had obtaining finance for commercial & industrial properties and if you found any particular bank more reasonable than others?

I have heard from a couple sources that the Bank of Queensland has helped them out where various other banks have turned their back on them - I'm not sure if this is applicable across the board or if this was simply due to their individual circumstances.

Thanks
Jonno

comm is a hard gig.

BUT mostly because of unrealistic expectations of buyers and potential owner occupiers.

Just because ABL will do say 75 % lvr for property x for borrower y doesnt mean they will do it for anyone else.

Perhaps the external servicability of the borrower meant they could buy an empty shed for 2 mill.

While comm has more flex than resi, mainly because of lower LVRs and significantly higher ROIs for the banks $( perceived rate for risk) comm finance will never be as "easy" as resi and thats that

in terms of who will do what...........much comes down to the property and the borrower, some lenders may have a particular target at the moment to either obtain or dispose of a particular industry or borrower type

ta
rolf

 

[Aaron_C]

Commercial is more 'flexible' but most of the time the small retail investor gets slugged an application/valuation/setup/establishment fee of 3% before they even start collecting rent. They are only more 'flexible' in the sense that they don't have to follow the NCCP rules so you avoid some of the absurdities that those rules create. However, apart from that, commercial lenders want to charge high rates, apply super-strict servicing criteria (so no one can borrow money except a BHP), and be extremely picky on their security. Not to mention that the process is extremely nebulous and very drawn out. Resi is far more straight forward.

 

[Mick C]

In one of the NAB "economical" quarterly newsletters, it was stating that the bank are now more cautions lending against comm security due to the uncertainty, slowing down of the china market and overall downward trend of the Global market, which in term may affect the Aus business and retailer business etc....

For the Sydney market - in the last 18 month the big 4 are now more focus on Residential loans/property and Business loans...rather then Comm property/loans. We use to place most of our comm deals with the big 4...now it's evenly split btw the smaller players and some international lenders because the terms of the loans are more attractive!

- long terms/years
- Higher LVR
- No annual review
- less paperwork

Regards
Michael

 

[John M]

Thanks for putting forward your opinions - it's great to hear from people with actual experience!

From your experience, would you say that banks are being 'tighter' with commercial/industrial loans than say 3-5 years ago?

Thanks

 

[APerry]

Not than 3 years ago, that was when things were at their worst, definately tighter than 5 years ago. Asan example post Lehman Bros collapse CBA dropped their max LVR by 5%, it went back up a bit over a year ago. All the banks have made changes to their servicing, for the worse, but the recent drop in rates has brought this back to pretty reasonable terms.

 

[John M]

All the banks have made changes to their servicing, for the worse, but the recent drop in rates has brought this back to pretty reasonable terms.

That's great to hear. Hopefully in the New Year I'll be able to see local businesses obtain the funding necessary for them to upgrade their facilities and continue to expand their operations.