At Eclipse, we have relationship with several business and commercial lending specialists to assist our business clients.

Commercial Loans are generally secured by a commercial property such as:Offices – single level small or large building or a single floor or suite in a larger building or an entire Warehouses, Showrooms

Retail premises which are mostly sole-operator premises

A building in use to run a business such as a dairy

Commercial property, in many cases, can be purchased with tenants and leases in place.

In New Zealand, tenants are liable for fitouts and repairs. They are also usually liable for utilities, rates and insurance. This can mean a better net return for the commercial property investor.

Security for business and commercial loans

Business or commercial finance loan will require security. Some of the options for security include:

  • Residential property
  • Commercial property
  • Assets of business, such as stock
  • Guarantee of directors supported by residential/commercial property

How much can I borrow?

Banks generally lend up to 65% of the value of the property or the purchase price although there is a potential to maximise the borrowing capacity if residential property is being offered as security. From Bank’s perspective having residential property minimises lending risks.

Commercial Loan Interest Rates and Repayment Terms

Commercial property loans repayment terms range between 10-15 years and you will also be paying a commercial interest rate. The final interest rate is determined by the level of the risk in the deal.

The risk is assessed by strength of existing and future leases. A long- term reliable tenant will be assessed more favourably by the bank than a lease reliant on small business.

Long term stability is important in commercial property as the value is determined by rental income it generates.

Offering a residential property in security provides some advantage to de-risk a deal. It allows terms up to 30 years and also minimise interest costs. Interest rates on commercial loans are usually 1-3% higher than standard home loan rates depending on risk profile.

How safe is the Building?

Commercial properties need to have a seismic evaluation done. This could start off with an IEP report (Initial Evaluation Procedure) and may end up with a DEE report (Detailed Engineering Evaluation) which will outline what needs to be done and how much it will cost. The ideal number with regards to earthquake strength is 66% but the higher the score the better.