At lamna, we now offer businesses asset-based loans backed by the value of their commercial property.
But what is a commercial asset-based loan? How does it work, and what are the potential advantages or drawbacks?
What is a commercial property loan?
A commercial property loan is a short-term funding solution for business owners. It involves using a building, a suite of offices or other commercial premises that are wholly owned by your company as collateral for a loan.
The property is evaluated, and the lender will offer your business a fixed cash amount at a specified rate of interest. If the money is not paid back according to the terms of the agreement, the lender is entitled to seize the property to cover the losses.
Because the loan is secured by collateral, there’s less risk for the loan provider. Accordingly, there’s no need for lengthy approval processes, and the loan can be granted quickly and at a comparatively favourable rate.
Why opt for a commercial property loan?
A commercial property loan enables rapid access to funds for your business. It’s a short-term solution, ideal for covering unexpected costs – such as costs associated with either business expansion or contraction.
You may need larger offices or warehousing space, equipment upgrades or more inventory and staff for the busy holiday season. Or, with South Africa’s challenging business conditions, you may need a little help in managing your cash flow to keep your company afloat and ensure salaries are paid on time.
As an asset-based loan is secured, there’s no need to sign a guarantee or provide your personal credit score or company’s credit rating as risk assessment tools.
All you have to do is apply for the loan, submit a few supporting documents, and wait for the funds to be transferred into your business account.
How do you secure an asset-based loan?
With lamna, the process of applying for an asset-based business loan is quick and easy.
Documents you’ll require to secure a loan on commercial property include:
- the original title deed of the property
- Erf details
- business bank account statements for the preceding 3 months
- company registration documents.
Once the property has been evaluated and your business loan application is approved, you’ll be offered a cash lump sum as a loan.
The loan has to be paid back over a negotiated term, and at a predefined rate of interest.
Benefits of asset-based business loans
Commercial property business loans have a number of benefits, chief of which is the ease and speed of securing the loans. You also have the freedom to use the funds as you wish.
These loans are a convenient solution especially for businesses that will struggle to secure bank business loans, for example because they haven’t yet been operating for long or don’t have ideal credit scores or financial track records.
Interest rates are competitive, and reflect the low risk of property-backed loans relative to unsecured funding. Terms are flexible, and regulated lenders like lamna do not impose any prepayment penalty if you opt to repay the loan before the negotiated term has elapsed.
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