As a SME business owner or director, navigating the changing business landscape can be a constant challenge. When it comes to expansion and growth, securing the necessary capital often presents a significant hurdle.
While bootstrapping and internal savings might be viable options in the initial stages, businesses seeking a more strategic and impactful expansion often require external funding. This is where commercial property loans in Singapore come in, offering a powerful tool to unlock your business growth potential.
What is Commercial Property Loan?
A commercial property loan is a financing solution provided by banks and financial institutions specifically for acquiring or refinancing commercial real estate. Commercial properties in Singapore serve primarily for business operations and income generation. This includes a wide range of property types, such as:
- Office buildings
- Warehouses
- Retail spaces such as shopping malls, gyms, restaurants, bars
- Industrial facilities
The commercial property loan amount is typically based on a percentage of the property’s value (Loan-To-Value ratio, or LTV). This is often subjected to the respective banks’ credit assessment. Unlike residential property loans, Monetary Authority of Singapore (MAS) does not mandate lenders to adhere to a specific set of industry lending guidelines for commercial property loans in Singapore.
Here are a few factors that determine your maximum loan limit for lenders:
- How long your business has been operating
- Annual revenue
- Financial figures such as profitability
- Profile of property being financed
- Cash flow strength
Businesses can also apply for an unsecured loan from other financial institutions concurrently with a mortgage application from their main bank, to finance up to 100% of the property’s purchase price. The business essentially does not need to put down any deposit for the purchase.
Banks typically grant a higher LTV of 80% to 90% for properties that are intended for business’s own usage. A maximum LTV of 60% to 70% is usually granted for investment purposes such as renting out for income.
However, we do not encourage excessive borrowing and leverage should be exercised with care. Speak with us on the options available to your SME in Singapore.
Benefits of Using Commercial Property Loans for Business Growth
1 Securing a Permanent Base for Operations
Owning your commercial property provides a sense of stability and control for your business. Your cash flow can be more effectively managed without the risk of unsustainable rent hikes. This allows for long-term planning and investment in customising the property to suit your business’ specific needs, creating a productive and efficient work environment.
Owning a prime commercial property can also significantly enhance your brand image and project a sense of stability to client, partners and potential investors. In 2017, Manulife acquired an office tower in Singapore’s CBD to further strengthen their brand and provide greater visibility to their consumers, underscoring the importance of property ownership in strengthening brand visibility and credibility.
2 Unlock Equity for Further Investment
Commercial properties are valuable assets, and owning one can significantly increase your company’s overall equity. This equity can be leveraged further through refinancing, allowing your business to access additional working capital for strategic investments. This, in turn, can help businesses increase revenue, improve efficiency and become more profitable.
3 Tax Savings
Business-owned commercial or industrial properties can be eligible for tax savings. Mortgage interest payments are usually tax deductible expenses while property depreciation could be eligible for capital allowance claims. Leveraging these tax benefits can enhance your company’s financial flexibility and competitiveness.
4 Potential for Long-term Appreciation
Historically, commercial real estate in Singapore has shown a trend of long-term appreciation. Owning a property allows your business to benefit from this potential value increase over time, furthering bolstering your company’s financial standing. This allows you to secure favourable financing terms and pursue strategic growth opportunities with confidence.
Important Considerations for Singapore SME Business Owners
1 Commercial Property Loan Eligibility
Your business’s financial health, credit score and ability to repay the loan will be assessed by banks before approving a commercial property loan. A strong business plan demonstrating positive cash flow and a good credit history are crucial factors for loan approval from traditional banking institutions.
However, for SMEs finding it a challenge to meet the stringent bank criteria, alternative options such as private lenders can be explored. With Poss Capital, you will only need to be a Limited Liability Partnership or a Exempt Private company and 6 months transaction history in an operating business bank account to proceed with your loan application.
2 Commercial Property Loan Terms and Conditions
Before signing any agreement, review the terms and conditions of the commercial property loan carefully, including interest rates, repayment terms, prepayment penalties, and any associated fees. Ensure that the loan structure aligns with your expected business cash flow and growth projections. Choosing a loan structure that suits your financial objectives can prevent potential strain on your business finances in the long run.
3 Expert Guidance
Navigating commercial property transactions can be complicated, especially for SMEs without extensive experience. Consider seeking professional advice from commercial property agents and financial consultants to navigate the process effectively. These professionals offer insights into market trends, help negotiate favourable loan terms, and ensure that your investment aligns with your business goals. Their expertise can help you make informed decisions and secure the best possible commercial property loan terms.
Why Use Poss Capital for Your Unsecured Business Loans in Singapore
While commercial property loans offer significant benefits for long-term business growth, some SMEs may require immediate working capital for operational needs or strategic investments. This is where Poss Capital comes in. We provide fast and flexible unsecured business loans of up to S$100,000, allowing you to bridge the gap and take advantage of time-sensitive opportunities.
What sets us apart are:
- Easy application process: Applying for business loans is quick and user-friendly, allowing you to focus on your business.
- Fast turnaround times: We understand the urgency of business needs, so we strive for Quik efficient loan processing and funds disbursement in as quick as 24hours from approval.
- Competitive rates: We offer competitive rates to make our loans accessible and affordable.
- Flexible repayment options: Tailor your loan tenure and no prepayment penalties for early payment. With the use of eGiro for repayment, you don’t have to worry about missing a payment and incurring late payment fees.
Whether you are a seasoned business owner or a startup, taking your venture to the next level often requires strategic planning and access to the right resources. Commercial property loans in Singapore can be a powerful tool to fuel your business growth by providing a permanent base, unlocking equity for further investment and enhancing your brand image.
Ready to unlock your business’s full potential? Contact Poss Capital today to explore our flexible business loan solutions. Together, let’s turn your vision into reality.
