In business, to take advantage of the most recent opportunities, planning and business expansions are necessary. You must spend money to buy or rent a new building to expand your company with more employees and technology. It needs a large amount of money. At times, you will not be able to produce such a sizable sum of money on your own; therefore, you will have to ask a bank for a loan.
Most banks provide a loan type known as a commercial property loan to aid small and medium-sized businesses in their expansion and growth. Such loans are available with either fixed or floating interest rates.
Under a scheme, you can pay a specific interest rate for a predetermined period. After that time, the rate of interest will begin to change following the bank’s determined rates. Under a floating interest rate scheme, the customer needs to pay interest that changes based on market rates.
When applying for a loan for commercial property, consider the following points:
- Eligibility criteria
You must have operated a business location in Singapore for at least a year to be eligible for a commercial property loan for a Singaporean SME. In addition, your company’s annual revenue must not surpass twenty million Singapore dollars, and 30% of the shareholdings must be Singaporean or permanent residents.
A commercial property loan is simple to obtain and involves less paperwork. You must first submit your business information via the app of the relevant bank must first submit your business information via the app of the relevant bank. By doing this, your bank will have access to those details via the portal and will have all the data necessary to process your financing. In some circumstances, the bank might ask you for:
- Business location and floor space details
- Value of the real estate
- If you are the tenant of the property, ensure to submit the rental agreement.
- Financial statements for the two previous years
- Bank statements for the three months’ prior
- Approved loan amount
Banks typically will not give a loan for the whole property’s market value. Then, you will need to invest some of the loan’s value, which might be challenging for you. To pay for the cost of the property, you must attempt to obtain the possible loan amount from the bank. Many banks in Singapore allow you to borrow up to 80% of a property’s market value.
- Processing charges and other associated costs
A certain sum of money will be deducted from the approved loan amount when you apply for financing. This fee includes service fees, documentation fees, and evaluation fees and costs. Even though this represents a modest portion of the overall value, it can have a significant impact on your finances if you are in a tight financial situation.
Understanding this, some banks, such as DBS, have developed specific subsidies to lower service and legal costs to aid SMEs in receiving the most benefit. Additionally, make sure you are aware of the property’s lock-in period when you apply for the loan. Most financial institutions have a lock-in period where you cannot sell or pledge the real estate for a predetermined time. If you break the rule, you must pay a fine that the bank has set.
- Tenure of Loan
The majority of banks in Singapore enable their customers to repay their loans at a time that is convenient for them. The time frame could be between 1 and 25 years. In this situation, the interest rate will fluctuate based on the loan amount and the period for repayment.
Calculate the monthly repayment amount depending on your financial circumstances before choosing the tenure. You can use the loan calculator to determine your monthly payment amount, which will help you decide whether to extend or shorten your term.
What are the benefits of a commercial property loan?
- Maximize your savings with this short-term deal.
- Choose from different packages, like SORA-pegged loans or fixed packages, based on your requirements.
- Adaptable loan terms
- Take out a loan for 80% of the value of your home.
- With one of the best mortgage packages available, you can get a large loan.
- The bank’s evaluation determines the loan amount that is approved.
- Enjoy a 1 to 25-year flexible repayment period.
How does it work?
- Submit an online application.
- Tell your sponsors about your application.
- Your guarantors will receive an email from the bank endorsing your application.
- The bank’s relationship manager will contact you.
- When you submit your application, you will also get an email with instructions regarding how to check for updates on it.
- Examine the offer before signing the contract.
You will get the counteroffer when everything is in order.
The majority of the necessary information can be retrieved if you apply through ACRA or MyInfo Business, so most businesses do not need to submit financial records. However, depending on the circumstances, more details are necessary.
You may also need to prepare the following additional information:
- Floor area, address, and property tenure
- Property price valuation details
- Purchase option (not compulsory)
- recent two years’ financial statements
- Recent three-month bank statements
You can apply for a property investment loan right now if you want to grow your company and have a good location in mind. Keeping these ideas in mind will assist you in preparing and applying for a commercial property loan in Singapore.