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Retail Commercial Loan

We help you secure a competitive commercial loan for your upcoming retail store.

Often, banks and non-bank lenders have common reservations against the retail industry. That’s because retail shops are most vulnerable to economic fluctuations and zoning changes.

However, retail businesses are still popular among investors and loan applicants. But how do you qualify and get approved for a retail commercial loan?

Read more to find out.

How much loan amount can I borrow?

Retail commercial loans have typically higher amounts and longer terms than other commercial and residential loans. That’s because most retail properties are not specialised properties and can cater for a wide range of business clients.

  • Retail commercial property: Loan about 80% of the commercial property value and up to 100% property value with loan security (residential property)
  • Specialised commercial property: Loan up to 60% property value
  • Lease, Low doc, and No doc commercial loan
  • Typical loan terms can range from 10 to 30 years.
  • Standard fixed loan rate for up to five (5) years
  • Interest-only commercial loan term for up to five (5) years
  • Get competitive interest rates on a case-to-case basis.
  • Lenders may also require yearly reviews.

Moreover, if you want to acquire the retail commercial property in a mixed-use zone, you’ll have better odds of getting approved for a commercial loan.

To find out which banks will consider your loan application, feel free to speak with our mortgage brokers at 1300 052 055 today.

What are specialised or purpose-built properties?

As discussed, banks and non-bank lenders prefer retail commercial loans to specialised or purpose-built commercial loans. But what exactly is the difference?

Standard or retail commercial properties include clothing shops, convenience stores, or hair and makeup salons. Owners can easily renovate these properties to accommodate different types of businesses.

On the other hand, specialised properties are built with a specific purpose. That includes butcheries and industrial warehouses with special designs intended for a single function, such as sub-floor drainages or wide entrances for logistics.

Keep in mind that banks and non-bank lenders have particular reservations for purpose-built facilities since they only target limited tenants and mostly have less market appeal.

How do banks assess retail properties?

Establishment size

Most commercial retail stores have a 25 to 60 sqm floor area, depending on the scale and location.

When it comes to the size of your property, lenders won’t have any reservations because a small or large establishment can still cater to countless niches and appeal to the masses.

But keep in mind that retail properties located in or close to central business districts are usually more expensive than properties outside busy cities.

Property location and zoning

Having robust foot traffic throughout the day will help strengthen your loan application since it means your tenants may generate strong revenue to pay the rent and other outgoings.

Banks consider this as a positive indicator for long-term tenancy. If you’re located in a highly competitive area, the property will also have a strong market appeal if you need to sell it out.

Another factor to consider is the commercial property’s zoning. Retail establishments have the most appeal if they’re in a Commercial 1 Zone since lenders zone them as mixed-use.

Commercial 1 Zone are close to residential areas and shopping centres. It makes sense to purchase a property where citizens usually live and do their shopping.

Additionally, some retail properties belong to a Commercial 2 Zone, which includes offices and industrial establishments.

Banks and non-bank lenders have particular reservations to Commercial 2-zoned properties because of their limited target tenants and minimal consumer traffic.

Your property tenants

Generally, lenders prefer approving loans for properties with a reliable long-term tenant. Having two or three years left on the lease term may also strengthen your application.

Some banks may even require you to have at least three lease renewal options so they’ll consider approving your retail commercial loan.

Vacant retail commercial properties

While banks can be conservative to vacant retail shops, they wouldn’t necessarily decline your loan application.

As long as you have a reliable long-term strategy in mind or manage your business directly from the establishment, you still have a good chance of securing the loan.

To further strengthen your application, teaming up with a commercial mortgage broker is a smart move. For more information, call us at 1300 052 055 today.

How will lenders evaluate retail tenants?

For retail commercial loans, banks and non-bank lenders will assess the business ventures of your tenants to scope their profitability and determine whether they can pay off outgoings.

So if the property has existing tenants, your bank may ask for their financial statements for at least two years prior. That way, you and your bank can evaluate whether your tenants are in for a quick profit or can sustain for the long run.

Will I qualify if I own the retail business?

Retail businesses are vulnerable to economic fluctuations and inadequate management. Banks will still approve loans where you run your retail store, but they want to assess the following points properly:

Your retail business experience

Having years of relevant experience in the retail industry and managerial positions is crucial to strengthen your loan application.

That means you should indicate in your application how capable you are in managing your brand as you did in the past. By doing so, banks can determine if you can stay profitable in the long run and meet your loan repayments on time.

Having a strong business plan

Your business experience is one way to assess your potential knowledge in running a business. On the other hand, submitting a robust business plan will indicate how you’ll streamline your strength and market edge into profit.

You should include the reasons for choosing the particular location in your plan and how it will keep your business afloat for years onward.

]Your business plan should also include how your business strategy puts you apart from direct competitors. Here, working with your accountant will improve your application case.

Direct business competitors

Having a diverse tenant mix for properties with several units will guarantee consistent foot traffic and an active economic environment.

On the other hand, running your business in the same property also implies that you may compete with other tenants directly. That’s why it’s crucial to show how your business strategy will keep you afloat amidst the presence of direct competition.

Joining active national or local industry organisations should give you relevant insights into running a profitable business in the local niche. An example of these groups is the Australian Retailers Association.

How can our mortgage brokers contribute?

Our commercial mortgage brokers at Plan A Mortgage have the skillset and experience in the lending industry, particularly in the retail arm.

We can give you data-driven recommendations to ace your loan application. Just present your case to us, and we’ll help you find the ideal lender and negotiate competitive rates.

Aside from that, discussing your current financial position and strengthening your case will help improve your borrowing power to qualify for a retail commercial loan.

Helpful tips in purchasing a retail property

The sheer potential of retail commercial properties makes it difficult to scout and purchase the right one for you.

Furthermore, the retail industry encompasses a widely diverse niche, so formulating the best strategy is essential. Here, we’ll give you some time-tested tips to make sure you’ve done your work on the property and retail business you want to purchase.

Speak with your local council for infrastructure planning

Choosing a strategic location is one thing. But to secure your retail property’s long-term value, consider speaking with your local council about zoning changes or potential infrastructure projects.

That’s because projects such as shopping districts or malls can impact foot traffic and niche competition. Zoning changes may also affect business peak hours and influence your daily revenue.

To make sure you’ll stay afloat and maximise your profit, speaking with your local council will help you prepare for the long run.

Do you have a new tenant waiting?

Finding a vacant property that’s available for purchase is rare. But if this is your case, we recommend speaking with the current vendor to secure a new tenant before you purchase the property.

If they refuse to lock in a new tenant, it could imply a stagnant market and is a red flag in which you need to be careful. Otherwise, giving a few months of free rent should help attract new tenants and provide them with time to settle down and operate.

Consider the target market when catering to blue-chip retail business

Blue-chip retail businesses stand out for their reliable track record and consistent consumer demand. That’s because building a strong relationship with its consumers is the core of a blue-chip store such as hobby shops.

Since blue-chip operations appeal to a particular consumer, reach is of utmost importance. That’s why it’s almost a no-brainer to expand digitally and utilise eCommerce channels aside from the physical store.

Nevertheless, many people still prefer face-to-face shopping, making the location crucial when accommodating blue-chip tenants or starting a retail business.

Retail commercial loan FAQs

At this point, you should already know about the sheer diversity of the retail industry. To give better light and understanding about retail commercial loans, we’ve answered your most common questions.

Can I apply for a loan on retail properties with residential units?

Many people think getting a loan for retail commercial properties with attached residential units such as strip shops is difficult.

However, we know some banks and non-bank lenders consider these properties mixed-use under the residential lending arm. That way, you can get up to a 75% loan-to-value ratio and lower residential loan rates, which are significantly lower than commercial rates.

These types of properties will also give you several income streams, one from retail rental income and another from the residential tenant.

Can I apply for a loan on a vacant unit in a shopping mall?

For entrepreneurs who want to run a business from a vacant retail store in a shopping centre, our mortgage brokers cannot assist you in getting a loan.

That’s because you’re only purchasing a vacant space or renting it from a larger entity. Banks and non-bank lenders cannot properly assess the unit’s property value and cannot give you an accurate evaluation.

Business parks also have the same limitation since a corporation or group of companies own the lot and the shop units.

On the other hand, our team can help you look for lenders to finance your business venture, given that you have available equity in a residential property.

Feel free to speak with our staff at 1300 052 055 to discover your options today.

Can I apply for a loan on a storefront with a shared parking space?

You can find vacant shop fronts for sale in arcades or shopping areas with shared public parking.

For arcades, you’re purchasing the vacant space as well as paying strata levies, among other outgoings. In this case, we can help you get finance from banks since they can also use the space as security.

While strata titles are somewhat different from standard freehold titles, most banks and non-bank lenders see them as standard commercial titles.

Get approved for a retail commercial loan today!

For more information regarding retail commercial loans, feel free to speak with us at 1300 052 055, and we’ll help you build a strong application case and get approved in no time.

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Get approved for a retail commercial loan today!

For more information regarding retail commercial loans, feel free to speak with us at 1300 052 055, and we’ll help you build a strong application case and get approved in no time.

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