Key takeaways
- Lenders assess commercial loan applications on business financials, property quality, security position and borrower experience.
- Business financials must show consistent profitability, positive cash flow and the capacity to service debt.
- Rental income on commercial property is usually assessed at 70 to 80% for serviceability.
- A strong security position includes a registered mortgage over the property and director guarantees.
A commercial loan is not assessed like a home loan. The lender is weighing up your business as much as the property, and knowing what they look at lets you go in prepared rather than hopeful. Andy has been broking since 2000, and he packages commercial applications so the lender sees strength, not gaps.
The Four Things Lenders Assess
Lenders assess commercial loan applications on business financials, property quality, security position and borrower experience. Each one matters, and a weakness in one can sometimes be offset by strength in another. The job of a good broker is knowing how to present the whole picture.
Business Financials
Business financials must demonstrate consistent profitability, positive cash flow and debt servicing capacity. The lender wants to see that the business makes money reliably and can comfortably cover the new repayments on top of its existing commitments. Clean, up-to-date financials make a real difference here.
The Property and How It Is Valued
Property valuation determines the loan-to-value ratio and borrowing capacity for commercial property purchases. On top of that, rental income is assessed at 70 to 80% for serviceability calculations on commercial properties, the lender deliberately discounts the rent to allow for vacancy and costs. So a property with a strong, long lease to a solid tenant assesses better than one with a short or shaky lease.
| What lenders assess | What strengthens it |
|---|---|
| Business financials | Consistent profit, positive cash flow |
| Property quality | Strong location, solid long-term tenant |
| Serviceability | Rent plus business income comfortably covering repayments |
| Security position | Registered mortgage, director guarantees |
| Borrower experience | Track record in the industry |
Your Experience Counts
Borrower experience in the industry strengthens commercial loan applications by demonstrating capability. A lender is more comfortable backing someone who has done it before. If you are newer, that is not a dealbreaker, it just means the other elements need to carry more weight, and the application needs to be presented well.
Security and Guarantees
The security position includes a registered mortgage over the property and personal guarantees from directors. Commercial lending almost always involves directors standing behind the loan, so understand what you are committing to before you sign. This is exactly the kind of thing Andy explains line by line.
How Andy Helps
Andy knows what each lender weighs most heavily, so he matches your application to the lender most likely to back it, and presents your financials and the property in their best light. See the business finance page, plus commercial property loans, then get in touch.
Commercial Loan Application Questions
What do lenders look at most in a commercial loan?
Your business financials, the property quality, the security position and your experience. Consistent profit and strong cash flow carry a lot of weight. Andy presents these in their best light.
Why is rental income discounted?
Lenders assess commercial rent at around 70 to 80% to allow for vacancy and costs. A long lease to a solid tenant assesses much better than a short or uncertain one.
Do directors have to give personal guarantees?
Usually, yes. Commercial lending typically involves a registered mortgage plus director guarantees. Andy will explain exactly what you are committing to before you sign.
Related Services
Small Business Loans
Small Business Loans →
Commercial Property Loans
Commercial Property Loans →
Commercial Finance for New Businesses
Commercial Finance for New Businesses →
Business Finance Broker
Business Finance Broker →
Business Finance
Business Finance →
We Make Finance a Breeze
Related Articles
