Eligibility Criteria For Commercial Property Loans In Singapore

As a small business, most banks will require you to be incorporated locally for around 12 to 24 months. To be eligible for a commercial property loan, businesses must also be at least 30% owned by Singaporeans/PRs. The company’s turnover is also limited to $20 million or less.

If you are business that has a smaller local ownership structure or turnover more than $20 million, you can still take out loan with the bank, but your commercial property loan is not classified under SME banking anymore.

Your company’s finances should be sound

Banks will need to ensure your company’s finances are sound enough to repay the loan. Banks usually calculate your company’s total debt servicing ratio (TDSR), which is your company’s annual net operating income divided by its total annual debt burden. If your company is in the red, or if cash flow is insufficient to service payment, TDSR will also apply to individual directors’ incomes. In general, the stronger your company’s financials, the better your chances of securing a commercial property loan.

Your personal finances matter too

Because SMEs are usually run by one or several partners, banks will usually check the personal credit ratings and history of your company’s partners as part of the SME loan approval process. A clean history of no defaults, foreclosures, court judgments and the like could give your company a better shot at securing a commercial property finance loan.

Loan-to-Value (LTV) Ratio For Your Commercial Property

In general, most banks in Singapore will extend 80% to 90% of your property purchase price or valuation.

However, your credit standing can affect how much loan banks may be willing to extend to you.

The kind of property you’re looking at is important

The property you intend to finance with the loan acts as collateral that the bank can seize if you don’t repay your loan on time. During the application process, banks are likely to look at several factors, such as what the property will be used for; projected returns from the property; location; property size and type; as well as prevailing market conditions. Before taking on a loan, you should examine each of these areas carefully, and choose a loan that best meets your needs.

Now you know more about commercial property loans, are you ready to take the next step? Buying the right property at the right entry price is crucial for a low risk investment. Contact our property consultants today, for us to guide you through your investment journey.