Does your credit score matter when looking for commercial property loans?

Are you a business owner in Australia seeking to expand by investing in a commercial property? 

Maybe you’re an investor seeking to expand your portfolio.

Commercial property loans are a necessary way to finance commercial property investments.  They can facilitate growth in your business, your portfolio and help you achieve your goals. However, the process of obtaining a commercial property loan in Australia is different to applying for a home loan – especially if you have a less than perfect credit history.

In this article, we provide information about commercial property loans in Australia and explore key concepts, such as commercial property lending, finance for bad credit, and poor credit loans. We’ll also discuss how commercial property loans with bad credit can affect your ability to obtain a loan and your choice of lenders. 

Talk to an expert for your Commercial Property Loan

The role credit score plays in obtaining commercial property loans

Your credit score is an important factor that lenders consider when evaluating your loan application. 

A good credit score indicates that you have a history of managing your finances responsibly and are less likely to default on the loan. On the other hand, a low credit score can make it more difficult to get approved for a loan and can result in higher interest rates.

When it comes to commercial property loans with bad credit, loan eligibility criteria can vary significantly between lenders but, in general, lenders will look at factors such as your credit history, income, and the value of the property you’re looking to finance. If you have a bad credit ratings, you may be required to provide additional collateral or a higher cash contribution. This is essentially lowering the loan to value ratio (LVR) and therefore lowering the risk to the lender.

If you’re concerned your bad credit ratings could affect your ability to obtain a commercial property loan, you should discuss this with your finance expert. This will enable them to workshop your actual situation with a lender or lenders before you apply and seek out finance for bad credit.  The more upfront you can be about your credit history and the reasons it may be impacted, the greater your chance of an approval.

So while bad credit ratings can be an influencing factor for your commercial property loan application it’s not the only factor.  The right lender selection and an application that mitigates a bad credit score can still result in successfully securing your commercial property finance.

Options for business owners with bad credit

If you have a bad credit history, you may be concerned that obtaining a commercial property finance loan will be difficult but there are lenders who will still consider your application even if you have previous defaults. These lenders may allow for a certain amount of defaults up to a certain dollar value and still provide finance for bad credit at a competitive rate.

Another option if you have bad credit is to seek out lenders who have developed commercial property lending products to meet the needs of a borrower with bad credit.  

If your application stacks up despite your bad credit score, some lenders will still offer lending with a risk fee built into their rates and fees.  They might also offer commercial property but at a lower loan to value ratio than you’d expect if your credit score was stronger.

Private lenders are another option to consider. 

These lenders may avoid credit scoring in their assessment process altogether. Instead, a private lenders assessment process will be to look at your overall financial position and the security of the property. If the security you can offer matches their policy you can often be approved irrespective of bad credit ratings.

You should note that each of these options have different implications for the borrower and different solutions will be appropriate depending on your personal situation.  It’s important to compare different loan options and make sure you understand the terms and conditions, interest rates, and repayment terms before going ahead.

The importance of expert advice for your commercial property loan

Summing up, your credit score has a real effect on the lender who will be able to offer you a commercial property finance loan in Australia.  It will impact your loan eligibility with some lenders and affect your interest rate and loan to value ratio at others.  The important takeaway is there are options to get approved for commercial property loans with bad credit meaning that bad credit on its own is not a reason not to pursue a commercial property purchase.

To understand which option is the best commercial property loan option for you and your business, seek to understand the different policy niches at different lenders and how that impacts their assessment process.  Once you’ve found lenders that will support an application with bad credit understand their terms, rates and fees before accepting any offer. 

If you’re looking for expert advice on the best commercial property loans, don’t hesitate to reach out to darkhorsefinancial.com.au our team are experts with Commercial Property Loans and Bad Credit Loans.

Disclaimer: This article does not take into account your personal circumstances and is not intended as advice.  You should always obtain professional advice related to your personal situation before making any loan, investment or financial decision.