Find Out How to Get a Commercial Property Loan for Your Business in Singapore

While running a business, you need to plan and expand your operations at some point to get new opportunities. Expanding your business requires capital, for you need to buy or rent a new building to house your additional employees and equipment. You will not be able to arrange such a huge amount of money on your own and will need to approach a bank for a loan. 

To help small and medium-scale businesses expand and grow, most banks offer a type of loan called a commercial property loan. You can avail of such loans on a fixed interest rate or floating interest rate.

Under a fixed interest scheme, you will have to pay a fixed rate of interest for a specified period. After that period, the interest rate will start fluctuating based on the rates decided by the bank. A floating interest rate scheme will have the customer pay interest that fluctuates depending on the market rates. You can also choose a SORA-pegged scheme with the interest rates specified by the Monetary Authority of Singapore.

Some things to keep in mind while going for a commercial property loan are:

Eligibility Criteria

To avail of a commercial property loan for an SME, you should have established a place of business in Singapore for more than a year. Apart from this, your company’s turnover should not exceed 20 million SGD, and at least 30% of the ownership must be permanent residents or citizens of Singapore.

Getting a commercial property loan is easy and requires less paperwork. First, you need to provide your business details through ACRA or MyInfo Business. Doing so will enable your bank to access those details through the portal and obtain all the information required to process your loan. In some cases, the bank may require you to provide more information regarding:

• Place of business and floor space
• The value of property
• Tenure of lease or rent, in case you are renting the property
• The past two years’ financial statements and
• The last three months’ bank statements

Percentage of Loan Approved

In most cases, banks will not provide a loan for the full value of the property. Then, you have to invest a portion of the value of the loan from your own pocket, which may be difficult for you to raise that amount of money on your own. Therefore, you have to try and get the maximum loan amount from the bank to cover the cost of the property. You can get up to 80% of the value of the property in most banks in Singapore.

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Processing Fees and Other Related Charges

When you apply for a loan, a certain amount of money is deducted from the sanctioned loan amount. This charge comprises documentation fees, service charges, and even valuation charges and expenses. Though this is a small portion of the total value, it can hurt your financials quite a bit, especially when you are on a financial crunch and did not plan for such costs. 

Knowing this, some banks, like DBS, have come up with certain subsidies to reduce service and legal charges to help SMEs get the maximum benefit. Also, when you apply for the loan, make sure that you are informed of the lock-in period for the property. Most banks have a lock-in period for the property where you are not allowed to pledge or sell the property for a time specified by the bank. In case of a violation of the rule, you have to pay a penalty fixed by the bank.

Tenure of Loan

Most banks in Singapore allow the customer to repay their loan within a period comfortable for the customer. The period may range from 1 to 25 years. In such a case, the interest will change depending on the amount of the loan and the repayment period. 

While choosing the tenure, make sure to calculate the repayable amount every month based on your affordability and financial condition. You can use the commercial property loan calculator to calculate how much you are going to pay monthly and decide on increasing or decreasing your tenure accordingly.

If you want to expand your business and have a suitable property in mind, you can go for a commercial property loan today. With these points in mind, you can effectively plan and apply for a property loan in Singapore.

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