You must have seen entrepreneurs renovate the workplace with stylish interiors and materials. These are a part of their marketing strategy which helps them look more professional and appeal to customers to expect advanced services.
If you too want to adopt the technique but still want the budget to be feasible, you may implement the plan through a commercial property loan. What exactly can this back your plan and secure the upcoming expense, learn through this article.
Table of contents
- What is a Commercial Real Estate Loan?
- How Does a Loan on Commercial Property Work?
- Documents Required for a Commercial Property Loan
- Documents to be Submitted Before Loan Disbursement – Phase 1
- Documents to be Submitted before Loan Disbursement – Phase 2
- Commercial Property Loan Eligibility
- Commercial Real Estate Loan Interest Rates and Fees
- FAQ’s about Commercial Property Loan
What is a Commercial Real Estate Loan?
To support the financial burden of the business owners, commercial property loans are a major perk through which one can expand their business or even modify the same. It is also popularly known as “Commercial Real Estate Loan”. The concept is pretty much similar to the home mortgage loan and works on the same principles.
How Does a Loan on Commercial Property Work?
Primarily, the owner needs to mortgage the same commercial property they want to renovate or expand. This gives them high-end finance for development purposes such as equipment of huge pieces of machinery, overall interior designing, new constructions, purchase of new business centres and a few more to be mentioned.
To avail the commercial real estate loan, the basic you are required is either the specific property you want to renovate or any other secondary income generating property under your name. Also, you need to have your business establishment in almost 51% of the ambience. Interestingly, you can have the liberty to choose the interest rate to be variable or fixed, as per the loan sanctioned.
This can fall between 10% to 30% to be paid within the tenure of 5 years to 25 years. Despite these, the pattern of payment may vary depending on the type of loan. This refers to the possibility that your monthly payment with interest will be the same until the whole is cleared. Or else, your the complete amortised will be made with the segregation of interests to be paid earlier followed by the wholesome payment of the mortgage.
Documents Required for a Commercial Property Loan
There are two phases at which the documents need to be submitted to the financial institutes within the restrictive period. The first phase considers the days to receive the below basic documentation processing. The other is to be submitted before the disbursement of the commercial property loan.
Documents to be Submitted Before Loan Disbursement – Phase 1
| Sections of Documents | Names |
| Mandatory Documents | Application Form attached with PAN Card |
| Identity Proof | Attach either Passport, Driving License, Voter ID, Aadhaar Card, GOI issued, or ID Card of Government Employee. |
| Address Proof | Attach any one of the below-mentioned documents such as Aadhaar Card, Voter ID, Driving License, GOI Issued Photo ID, Electricity Bill, Govt Employee ID, Telephone Bill, Gas Bill or even (Landline) Property Tax Receipt. |
| Date of Birth Proof | Attach any of the following such as Aadhaar Card, PAN Card,Passport along with Date of Birth, Birth Certificate, Driving License or SSC Marksheet |
| Signature Proof | Attach any of the following such as PAN Card, Passport, Banker’s verification Notarized affidavit with ID and Address proof (not required in case of financial applicant) |
| Proof of Income | Attach any of the following: For Indian Citizens:Salaried Self Employed pay slip for three monthspay slip of six months or two years bonus proof for variable payBank statement of six months to show salary credits2 yrs Form 16 (or employment continuity proof)For NRI Salaried:Pay slip for three monthsAppointment letter or contract letter from the companyContinuos Discharge Certificate ( In case of shipping)Domestic NRE or NRO account statement for Six monthInternational salary account statement for Six month Overseas Credit ReportValid visa copy or OCI cardPhotocopy of Passport Details of POA ITR for two years, Computation of Income, P&L, Balance sheet along with CA seal and applicant’s signatureAsha HL for one year ITR, P&L, Computation of Income, Balance sheet with CA seal and applicant’s signature Tax Audit Report (If Gross Turnover Exceeds Rs. 1 Cr or Gross Receipts Exceeds Rs. 25 Lakhs)Bank statements for six months of personal and business accountsIf ITR is filed without digital sign – CPC and tax paid challanBusiness continuity proof (3 yrs for HL / 5 yrs for LAP) |
| For Balance Transfer / Takeover of Loan from other bank / financial institution | Loan account statement with recent outstanding letter for twelve monthsdetails of existing loan and bank statement from where EMI is deducted of six months |
| Lease Rental Discounting | bank statement of credited balance for six monthsRegistered lease agreementsTwo years ITR, Income Computation, P&L, Balance sheet with CA’s seal and signatureOne year 26 ASPartnership deed, audited financials for two years, KYC, operative account, partnership authority letter (In case of Partnership organisation) |
| For applicants who are Partners in a Firm / Directors in a Company | Company Partnership Deed’s of Partner or Partnership Firm Director , List of all the active and silent partners, NOC as per Axis Bank formatPartnership firm’s audited ITR along with complete financialsPartnership authority letter on letterhead of the Firm signed by all partners in case Firm to stand as guarantorFor the company – 2 yrs ITR, Computation of Income, P&L, Balance sheet with CA seal and signTax Audit Report (Where Gross Turnover Exceeds Rs 1 Cr or Gross Receipts exceeds 25 Lac)Board Resolution (if Company is applicant) as per Axis bank formatCertificate of Incorporation, MOA and AOADIN of all Directors, Board Resolution if Company (as per Axis bank format)Latest Share Holding Pattern duly signed by Company secretary/List of Directors |
| Other Important Documents and Checks | Completely filled and duly signed application form along with all applicants latest passport size photoAadhar card is mandatory for Credit Linked Subsidy Scheme (PMAY) applicantsPAN card is mandatory for all financial applicantsProcessing Fee and CERSAI chequesSelf-attestation of borrowers on all documents submitted |
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Documents to be Submitted before Loan Disbursement – Phase 2
The commercial real estate loan can be processed through two phases where the above has explained the first segment of documentation. The second phase includes submitting the below-required documents within five days of disbursement. This is the last step from the applicant’s side. Hence, ensuring this step will help you get closer to your commercial property loan agreement.
| Name of Documents | Informations to Provide |
| Loan Agreement and Annexures | Loan agreement according to the product typeAnnexures to be duly filled, signatures and stamped under state law:MCLR consent letterMII (Most Important Information) pagesLoan restriction letter (if any)Disbursement request letterSchedule of loan agreementList of Documents (LOD) (For NRIs) :Indemnity for under construction cases in plot loansfranked GPA documentGuarantor agreement (if required)Any updates/correction to be authenticated by the applicants |
| National Automated Clearance House (NACH) mandate/ Standing Instruction (SI) form and Security Cheques (SPDC) | NACH or SI mandate with a cancelled cheque with Account holder’s name in the bank recordsSPDC – 3 undated security PDCs equivalent to EMI amount1 undated cheque with amount kept blank1 cheque towards PEMI amountSPDC favoring “AXIS BANK LTD LOAN A/C Customer Name |
| Loan Cover/ Insurance Details | Property insurance application form (mandatory)General insurance application form (if applicable)Life insurance application form (if applicable) |
| Processing Fee / Equitable Mortgage cheques | Balance processing fee cheque (with clearance details)Equitable mortgage charges / stamping charges favoring“AXIS BANK LTD A/C SERVICE CHARGES” |
| Property Documents | Property documents as per type of transaction, according to bank’s policy |
| For Balance Transfer / Takeover of loan from other bank / financial institution | Original list of documents from previous financerLatest 12 months loan A/C statement with latest outstanding letterExisting loan details and 6 months bank statement from where EMI is deducted.Indenture of guarantee, the undertaking of indemnity, forwarding letter and Annexures in Axis Bank format |
| Own Contribution Receipts | Bank statement reflecting debit of own contribution paid. |
| Sanction Letter | Duly accepted and signed by all applicants / power of attorneyAll sanction conditions to be met |
| TDS | If TDS is paid by applicant – TDS challan & bank statement reflecting debit of TDS paidIf TDS is not paid by applicant – Undertaking cum indemnity to deduct TDS amount from disbursement |
| PSL Documents | Financial documents (any of the below): Audited balance sheetCA certificate – original investment in Plant & MachineryCopy of invoice (investment in Plant & Machinery)Additional documents (any of the below): Audited / Unaudited (Profit & Loss Account)GST registration certificateFor LAP cases – PSL Annexures |
| Other Documents (to be collected if applicable) | Letter from customer towards opting for EMI in case of partly disbursed caseVernacular/indemnity bond Dual name/dual sign affidavitCredit Linked Subsidy Scheme (PMAY) affidavitAmenities agreement duly signed by 3rd party/sellersEnd-use letter for Top Up/LAP/LAP top-up cases |
Commercial Property Loan Eligibility
The eligibility criteria for commercial real estate loan or commercial property loan may differ for financial institutes. You may find some good policies in one bank and some typically inconvenient in another. Thus, it is advisable to research well before you apply for a commercial property loan. This simply means your bank or lender may impose criteria other than the basics and must be checked before applying. But the regular formula you must adhere to is meeting the minimum yearly revenue and presenting as a constant profit maker for a certain good time.
Again, the judgement will be done as per the banks to approve your commercial property loan. Try to apply to those financial institutes where you are already an existing customer. This will help you grab some benefits which may not be adhered to by the new customers. But this does not mean that you are over the duty of researching and finding the best lender for you, as it promotes your finance market knowledge as well. Let us understand the basic eligibility an entrepreneur must possess while applying for a commercial real estate loan.
Following are the other eligibility criteria an entrepreneur needs to fulfil:
- Partnership firms, sole proprietorship firms, public limited companies, private limited companies, and self-employed professionals and non-professionals can apply for commercial loans or business loans in India.
- The business entity that needs a commercial loan should have a good turnover. The turnover requirement will differ from lender to lender. You can check with your lender.
- Each loan applicant should meet the minimum annual income requirement as a firm.
- The firm should have been making profits for a certain period, which the lender will specify.
- The company interested in a commercial loan should have been in business for a certain period, which the lender will mention.
- The minimum age criterion for an individual applying on behalf of their firm is typically 21. The maximum age requirement is 65 years. This can change from lender to lender.
Commercial Real Estate Loan Interest Rates and Fees
Any entrepreneur who is planning for the disbursement of a commercial real estate loan has to pay an additional fee for processing. These charges are divided into separate segments such as legal charges, stamp duty, amortised charges, loan applicant charges, pre-payment fees, late payment fees, and many more. The debtor will be known for all the charges prior to their application.
End Thoughts
As an organisation, a commercial property loan or the commercial real estate loan can bring new refreshment to your gaining strength. It facilitates the businesses to be secure about their development and growth. In recent years, entrepreneurship has been raised impressively. This eventually has brought some convenient options for the business owners also to be more fit for the competition and grow simultaneously. And for such a competitive benefit, you need to ensure the regular income and goodwill in the market. This helps you to stand eligible under each umbrella of loan sanction and also the lender to trust your credibility.
FAQ’s about Commercial Property Loan
Q1. What is a loan for commercial property?
A commercial property loan a.k.a commercial real estate loan is a financial credit availed by a business owner for the development programmers by mortgaging the commercial property or any other commercial centre against the loan. It is a high valued monetary support that can be lent to the companies that stands eligible under different criteria.
Q2. Can you get the loan on commercial property?
Any entrepreneur can apply for a commercial real estate loan either individually or in a co-partnership. But in case you apply with other businessmen, all your colleagues have to be owners of the same banner.
Q3. How much loan can commercial property Get?
A business owner can take over the commercial property loan for up to 70% of the purchase cost of the property mortgaged or the loan eligibility offered by the lender.
Q4. What is the commercial property loan interest rate?
The standard chartered bank commercial property loan interest rate may fall under the bracket of 8.75% to 11.05% for Rs. 10,000 with 1% of the loan amount in addition to the GST charges.
