The National Consumer Credit Protection (NCCP) Act only protects individuals that intend to use their commercial loans for residential development, which may limit the number of available loan brokers. Thus, the business purpose behind a desired commercial loan will impact associated interest rates, security, deposits, or loan availability.
Risk assessment.
Investments that intend to buy or refinance a commercial property leased to the lender are considered a low-investment risk for loan brokers. Then, medium lending risks occur when the lender is an owner-occupier of the commercial property that will either be leased or used for business purposes. Lastly, high lending risk happens when a loan broker funds daily working capital for the business to conduct day-to-day operations and cover liquidity shortfalls.
Standard and specialised business purposes.
Loan brokers typically approve standard commercial properties that host offices, factories, warehouses, storage, showrooms, and shopfronts. Specialised commercial properties are viewed with a higher investment risk for loan brokers, and these properties may provide a business service or act as a centre for accommodations (i.e., tourism, recreations, and entertainment), childcare, age-related, or shopping centres, petrol stations, restaurants, supermarkets, and or management facilities. A lengthy and detailed valuation of the property and business services and risk assessment for specialised commercial loans will be required.
Using the terms of the commercial loans to an advantage.
Different types of commercial loans also have various impacts on the loan amount, terms, and conditions. There are full-, low-, and lease-doc commercial loan options, where full-doc loans are seen as a lower investment risk to loan brokers than low- and lease-doc loans. Full-doc loans may offer lower comparative interest rates, security, and deposit compared to the others as income has been verified and the borrower has an exceptional credit score. Also, loan brokers prefer short loan terms, meaning a borrower may be able to minimise their repayment risks by choosing a shorter loan term option.