Six things to note before you buy an industrial property

Industrial Property Advice

There are a few things a company need to pay attention before dipping into an industrial or commercial property purchase

1. The very first thing you will have to do before approaching the bank or financial company is establish, in very precise detail, your entire business plan. It includes your financial projections (including projected net profits), estimated costs, financial histories, statements and property valuation.

2. SMEs (Small Medium Enterprises) and start-ups run the risk of being typecast as financial risks due to their small paid-up capital. If you can reflect a higher and realistic paid-up capital in comparison to the loan you are applying for, you stand a better chance of acquiring the loan as this shows the bank your commitment to the business. The loan ideally, should be a fraction of your capital.

3. If you intend to sell a product, you need to ensure that upon presenting your business plan that you not only have a working prototype of your product but possess in your business inventory, a small number of finished goods that are ready to be sold in the preliminary markets.

This is important because it proves to the bank that should the loan be provided; you are ready to make money instead of spending time to complete an unfinished product. The important thing here is to be generating your own profits as soon as you can so having products ready to sell with a client base that is ready to buy will make your proposition more attractive. This will also shorten your pay-back period if you are able to be cash positive quickly.

4. Your credit scoring is important. Your credibility is tied directly to your credit score and banks will absolutely use this as a risk management tool to evaluate how much of a financial risk you are to them. Ensure your credit rating is good by paying your bills on time. Do not default on any loans and avoid bankruptcy.

5. If your business has nothing to offer up as collateral, the banks will not want to take a chance on you because your venture will have no value to them. Banks basically want to ensure that if your venture fails, they are still able to gain restitution from you through something like liquid cash or property.

6. Consider a government assisted loan if the industry you are into is suffering from unforeseen economic weather. If the property loan is approved, the government will share a portion of your loan risk in case you default the loan repayment due to economic turmoil.

 In Singapore, banks and financial companies provide generally two types of loans; Singapore Interbank Offered Rate (SIBOR) and Singapore Swap Offered Rate (SOR). SIBOR is used mostly for residential investments while SOR primarily for commercial.

Otherwise, there are at least four well known financial companies which provide loans for the budding entrepreneur; Orix Leasing, IFS Capital, Hong Leong Finance and Sing Investments & Finance.

Most banks and financial companies provide SOR loans with different packages and benefits so you will need to do your research and with the help of your property lawyer, decide what type of loan is best for you and your venture.

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