If you are looking to improve, expand or start to develop a commercial farm or other rural property you should consider a little help in form of a commercial property loan. Your dream of a rustic lifestyle more in touch with nature could be financed with a loan specially crafted for your needs. Taking out a loan can help you level up your business, farm or other income-producing rural property.
We will explain the main steps you need to go through to start growing your business with ease.
The lending criteria
A detailed evaluation will always be necessary. The lenders want to have some assurance before investing in your business that the investment is the right fit for them as well as you and your property.
Show them you have the experience running the business in a steady financial manner. The usual requests include a financial statement with Business Activity Statements (BAS), an Australian Taxation Office (ATO) tax portal printout, or a bank statement for the past three to six months. There might be the added request to submit a business plan that details the market competition and your business model, along with a cash flow forecast.
Different lenders have different criteria. Some of the main things lenders look for when you apply for a loan are location, land size, land use and property access.
Locations – some lenders do not provide rural home loans outside their approved postcodes. Under Commercial Lending this is less of a problem as lenders become more flexible.
Land size – there isn’t a land size limit for rural property loans but once your property exceeds 100 acres it might not be considered a hobby farm and it would be more suitable for you to apply for a commercial loan.
Land use – the use of land determines the type of the rural loan you can get. A rural home loan is for the lands used for personal or investment purposes, while fully functioning farms are eligible for commercial loans.
Property access – for example, easy access to roads will prevent any damage to vehicles and machinery which will keep insurance costs low.
Your lenders will ask you to use something as security in case you are no longer able to keep up with loan payments, due to unforeseen circumstances. The asset you are willing to put down as a security (purchased security or existing security) will be evaluated to make sure the value is in alignment with the loan. In case of a forced sale for paying off the debt, the value of the security should cover the entire loan. The security can be the equipment like your tractors and cranes, your livestock, or other income-producing stock (more common under Equipment Finance and Livestock Lending).
The deposit for your rural property lenders can require typically ranges from 5% up to 30%. It depends on the size of your property and the location.
You can make it easier to get the best rates available for your rural property loan by contacting Aglend. It’s always best to have financing arranged first, so please don’t hesitate to call Aglend, we are here for you.