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Lina Tay
December 12, 2023
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Owning a piece of commercial property can be immensely beneficial for business owners. It serves as an excellent investment due to its potential appreciation in value and acts as an inflation hedge. Additionally, commercial properties can provide a form of security during challenging times.
Understanding how commercial property loans work is crucial if you run a business or have stakes in one. provides a detled guide on Singapore commercial property loans.
Commercial property loans are fundamentally different from home loans. While home loans are disbursed to individuals for the purchase of residential properties, commercial property loans are reserved exclusively for companies and other commercial entities to finance assets categorized as commercial property. This includes retl spaces, warehouses, factories, office units, malls, hotels, agricultural land, and commercial lands.
It is essential to differentiate between these two types of loans because it can significantly impact your financial decisions.
Commercial loans are typically structured under the auspices of a business entity. Lers consider various factors when determining the loan-to-value LTV limit as well as other terms and conditions. Here are some key considerations for commercial property loans:
Current Market Conditions: The prevling market dynamics can significantly influence the ler’s decision.
Perceived Risks Involved: The level of risk associated with your business and the specific project.
Purpose of the Property: Whether it is inted for leasing, sale, or operational purposes.
Expected Returns from the Property: Projections based on the anticipated income or rental value.
Type, Size, and Location of the Property: Specific characteristics that influence the loan terms.
It's important to note that unlike home loans, commercial property loans are not subject to the Total Debt Servicing Ratio TDSR.
An LTV limit is the maximum amount of financing you can receive for your commercial property. Home loans typically offer an LTV limit of up to 75 from banks and private lers, with HDB loans providing a slightly higher limit of 80. In contrast, commercial properties are usually financed at an LTV limit between 80 and 90.
Loan tenures for commercial property loans can vary widely. Generally, they range from one to five years, but some lers may offer longer terms. The interest rates also differ significantly based on the ler’s criteria.
Interest rates for commercial property loans are typically higher than those for residential mortgages due to the associated risks and complexity of the transactions.
Commercial properties can be a significant asset for businesses, offering various benefits such as:
Income Generation: Leasing out office spaces or retl units can generate rental income.
Operational Support: Using commercial property to expand business operations or store inventory.
Investment Opportunity: Holding commercial properties as an investment portfolio.
Lingpot, a leading digital loan marketplace in Singapore, connects small and medium-sized enterprises SMEs with its network of over 45 lers. This includes banks, financial institutions, private, and peer-to-peer lers. Our platform helps SMEs navigate the complex landscape of commercial property loans by offering competitive rates and flexible terms.
Commercial properties can be a valuable asset for businesses seeking to grow or secure their future. By understanding the intricacies of commercial property loans and leveraging platforms like Lingpot, you can make informed decisions that benefit your business.
At Lingpot, we are committed to providing SMEs with transparent and accessible financing options. Whether you need a term loan, property-backed loan, invoice financing, or any other type of business financing, our experts are here to guide you.
About the Author
Lina heads up all things marketing and branding at Lingpot. With a keen aesthetic eye, she believes in using design to communicate with SMEs effectively. She aspires to make Lingpot a household name in Singapore's financial landscape.
Outside of work, Lina is an avid camper who enjoys appreciating the beauty of nature.
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By Lina Tay
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Singapore commercial property loans Commercial property loan factors Loan to value limit comparison Commercial property investment benefits Lendingpot commercial loans SME business financing options