For most of us, our home is normally the first property we buy. Some are happy with one property while others decide that they want to own investment properties too.
For others though, the family home can be the springboard to business success.
The rules of commercial lending are the same, but different, to residential lending. If you wanted a loan for your business the two key questions would be the same
- Do you have the income to make the loan repayments?
- What’s the valuation of the property you are lending against?
The bedrock of any business lending is the asset the loan is secured against. And most business lending starts off with lending against the family home – and can often be at standard residential rates. Thereafter, the banks will lend against the underlying value of the business.
When it comes to business lending, the terms will vary. Typically a business loan will have:
- Higher interest rates
- Shorter loan terms
- Higher fees
- More frequent reviews by the bank
Some banks will secure a business loan against a home, with very competitive rates. When businesses are in their growth phase, those lower rates may well be the determinant of business success or not.
If you would like to know more about borrowing for business purposes, please contact Chan & Naylor Finance.