Commercial finance is generally offered by a bank or other lender, but as real estate crowdfunding takes off across Australia, it has cemented itself as another leading finance method for commercial properties. Depending on the type of project you want to embark on, there’s a world of finance options available.
Whether you are looking for commercial finance or another type of finance, depends on a number of factors.
What is Commercial Property Finance?
Commercial property finance can be defined as: ‘finance secured against commercial property – either offices, retail, industrial or leisure premises or multiple residential properties that are being developed to be sold on’. The finance may be to develop, build or purchase commercial property.
Commercial property is a complex business, but is a profitable one. Last year saw the biggest surge in occupier activity in regional cities. There has never been a better time to invest in commercial property across Australia, and whatever the scale of your development, and your level of expertise, CrowdfundUP has a highly experienced team to make your funding goal a practical reality.
Type of commercial finance
Bridging FinanceBridging finance
is a short-term loan, usually for 12 months or less, used to plug the funding gap until permanent finance to fund your construction project is in place. Additionally, this finance is flexible and secured, it provides you with the quick cash injection that you may not have been able to secure elsewhere
With more speculative development taking place than ever before, bridging finance is on the up but it’s not easy to secure from high street banks. Our commercial property experience means we can realistically assess the potential of your project and provide the right finance from our network of Investors.
Dependant on your situation, there are two types of bringing loans to choose from:
・A ‘Closed’ bridge loan
This is used when there is a set date for when the loan must be repaid. You’re likely to be eligible for this type of loan if you have a long-term funding option already arranged, such as the sale of your existing property.
・An ‘Open’ bridge loan
This type of loan is useful when there isn’t a definite long-term finance option in place. The loan may run for six or nine months, however, depending on the circumstances, this may be longer.
The next type of funding within property is development finance. This can mean any short-term funding that helps pay for building and development costs. This finance is bespoke funding, likely to be released in stages to commercial property developers to fund the building or renovation of a specific development.
Bridge and development finance have significant overlap, and might seem interchangeable, but there are differences between the two. The main thing that determines if you need bridging finance or development finance is how ‘heavy’ the project will be.
A commercial mortgage
is a loan secured by commercial property such as shopping centre, industrial, office building or land.
Unlike a residential mortgage, it’s usually taken out by businesses rather than individuals.
Mezzanine FinanceMezzanine finance plugs the funding
gap that is left on development after the principal lending and owner’s investment have been taking into account. It is generally offered as a debt, but with covenants, often stating that if it’s not paid back on time, the debt will convert to equity. If you do need a funding boost to top up your principle lending and get your development off the ground, and you have a track record in property development, mezzanine finance could be the solution you’re looking for, and CrowdfundUP investors are always looking for these types of investments.
Crowdsourced Finance in Real Estate
One innovation approach which can be effectively applied in the financial sector is Crowdsourcing finance. Real estate Crowdfunding connects to investors to property groups or those seeking loans
, to raise money for a development or acquisition project. Crowdsourced finance
opens up new networks of Investors, and is an alternative to banks in a tighter lending environment where you may not be able to access the full amount of funding required for the project.
Getting the Right Finance
As you can see, commercial property finance is complicated, especially when it comes to financing - there are many options that can be applied individually, or together.
Ultimately, the best first step to take when determining what type of finance you need is to assess how extensive the project is, how long it will take, and how much it is likely to cost in both the best- and worst-case scenario.
Feb 14. 2018