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Commercial Property Loan in Singapore for your business - When & Why?

When should you get a Commercial Property Loan?

You have been in the market for a few years, you have supportive employees, an already established presence, a killer business strategy, and most importantly, you see great potential for an upward trend in profitability for your business in the near future.

Now here comes the problem: Your limited physical/office space is getting in your way! For retailers especially, you might be frustrated with fluctuating rents charged by your landlords or faced with strict refurbishment restrictions for your store. For all small businesses and SMEs, regardless of whether you are leasing a retail or office space, chances are, your physical space is also limited – which might limit business operations/expansion and also affect both employee morale and customer traffic (for retailers) – and the constant worry from landlords changing rental prices and/or pressuring you to move out is inevitably getting to you.

If you can relate to what has been described above, then our answer to you is yes, it might just be the best time to take out a Commercial Property Loan now and purchase your own commercial space.

Why should you get a Commercial Property Loan?

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If you are still hesitating even if your business is on the right track for growth (established presence, actional and effective business strategy, sustainable profits, loyal customer base, and supportive employees, etc.), let us convince you further on why with 3 more reasons below on how a commercial property loan can help:

1) Predictable monthly expenses (assuming that your commercial property loan is taken with a fixed interest rate)

Instead of having to worry about varying rental charges set by the landlord (only applicable to the Retail and F&B industry) or price differences in lease renewals based on prevailing market rates, with a commercial property loan, you would know exactly what to expect for your monthly repayments through the help of a loan calculator provided by respective banks. This way, you are able to understand the Effective Interest Rate (EIR) and be presented with a desired repayment period suitable for your business.

2) Have more flexibility and control for your commercial space

By having your own commercial property in Singapore through the help of a commercial property loan, you are able to set your own rules and guidelines without having to worry about restrictions set by landlords. Renegotiations at the end of rental contracts and the possibility of having to move out based on the landlord’s decision can also be eliminated. Thus, spaces within your own commercial property can also be freely used and defined based on your own preferences to either enhance store layout or improve the office environment. Furthermore, in view of the pandemic where flexible work arrangements appear to be the new normal, ownership of your own commercial property would also not let any of your free space be gone to waste as you would also be able to sublet it out – something which potentially cannot be done if your commercial space is leased.

3) Gain long-term benefits

Taking a commercial property loan would be the first step in helping you to attain your very own commercial space in Singapore, serving as an asset to you and your business. In the long run, apart from the possibilities of market appreciation for your commercial property, it can also be used as collateral (once the existing commercial property loan has been repaid) for future business loans, entitling you to receive lower interest rates and higher application success rates.

Also, in the long run, with monthly repayments heading towards your property repayment, you are essentially contributing towards your property equity, as compared to leasing, where monthly payments are treated as an expense.

For example, consider a commercial property worth $500,000 and a down payment of $100,000, with monthly repayments of $2,500 for a total of 20 years. Now, consider another leasing option for $2,500 a month for a contract lasting 2 years. Assuming that prices are consistent within the property market (for simplicity), after 2 years, you would have incurred $60,000 in rental expenses as compared to a $60,000 gain in property equity!

Conclusively…

Purchasing your own commercial property in Singapore would still require large upfront costs along with many other factors to consider. While we have listed out the benefits of owning a commercial property, it is still advisable for you to evaluate your own company’s circumstances before you make a financial commitment to take out a commercial property loan.

If you would like to understand further on when it would be the most suitable time for you to get a commercial property loan and reasons as to why (based on your business circumstances), feel free to reach out to us and see how we can be of any help to you and your business!

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About Author

Jayce Tang

Jayce is a digital marketing intern at Bizsquare Management Consultants Pte Ltd. He loves driving and in his free time, he enjoys hanging out with his friends and family.