So you’ve been eyeing a commercial property and now you’re ready to make a purchase. Before you go any further, it’s good to understand the intricacies of purchasing commercial properties as well as how commercial property loans work. The following are some helpful information that will assist you in the process of securing your commercial property loan.

Commercial Property Loans Percentage

Firstly, what is the commercial property’s maximum loan percentage? For commercial properties, the maximum loan that you can obtain is up to 85% under personal name as opposed to 90% loan for residential properties. This difference can be a key in your decision making as you will generally need to put more cash upfront for commercial properties compared to residential properties.

On the other hand, commercial property buyers qualify for 80-85% loan margins for commercial property purchases regardless of the number commercial properties purchased. This differs from residential property loan where 90% loan margin is accorded to the first 2 properties and the 3rd residential property qualifies for only 70% loan.

So what types of properties require commercial property loans? Below are the type of properties that will require commercial property loans.

  • Retail shop lot / Shop house
  • Office units
  • Factory lots
  • SoFo (small office, flexible office)
  • SoVo (small office, virtual office)
  • Commercial land
  • Agricultural land
  • Serviced apartments
  • SoHo (small office, home office): this depends on bank policy

While banks have differing criteria when it comes to accepting and approving commercial property loans, the general criteria is always the viability of business for the commercial property.

Factors such as location, type of commercial property, type of land and usage, location in mixed development, total number of units and floor location are all taken into consideration in the process of accepting and approving commercial property loans.

Documentation Needed for the bank

So what documents do you need to furnish the bank in order to apply for a commercial property loan? For a Sdn Bhd company (purchasing under company name) that comprises of 2 individuals or more, you will require the following documents.

  • Form 24 & 49
  • Latest P&L (Profit & Loss) Statement
  • Memorandum of Article
  • Company Profile
  • Form 9
  • 12 months bank statement
  • Latest audited report

For those who are running a business under Sole Proprietorship or Partnership, they will be required to provide additional documents namely

  • Form A and Form D
  • Name card

For commercial property loans, you need to be aware of a lower maximum margin of finance compared with the 90% for residential property loans. Be ready to put up more cash upfront. Also be prepared for a lower maximum loan tenure, ranging from 25-30 years for commercial properties.

Banks also place certain restrictions on the types of commercial properties they would finance hence you might be offered a lower margin of finance if the banks deem the commercial property of your choice is not commercially attractive or viable. The key is to shop around and compare loan details.

Diversifying your property portfolio is generally on of the key reasons for looking at commercial properties. Investors are likely to invest in commercial properties to generate revenue and get profits by leases out to long-term or short-term tenants. With a favourable commercial property loan, coupled with well-managed commercial property, one can get excellent revenue or sale profits.

If you are looking for a commercial property loan, check out for a detailed comparison of available commercial property loans.