Prime vs Alt Doc vs Lease Doc Commercial Property Loans
Prime, alt doc and lease doc commercial loans differ mainly in how income is verified. Here is how each option works and who it may suit.
A commercial property loan can be assessed as prime, alt doc or lease doc. The main difference is how the lender verifies the borrower’s ability to repay.
What is a prime commercial property loan?
A prime commercial loan, often called a full-doc loan, uses standard financial evidence. A PAYG borrower may provide payslips and tax returns. A self-employed borrower will generally provide company and personal tax returns, financial statements and recent business activity statements.
Prime loans usually suit established borrowers with strong credit, stable income and up-to-date financials. Because the lender receives more evidence, prime loans will generally offer the sharpest pricing and broader lender choice.
What is an alt doc commercial property loan?
An alt doc loan is designed mainly for self-employed borrowers who can demonstrate income but may not have two years of finalised financial statements or tax returns.
Instead, the lender may consider recent BAS, business bank statements, an accountant’s letter or a borrower income declaration. Requirements vary between lenders.
Alt doc does not mean no documentation. The lender still assesses credit history, property security, deposit, business performance and whether the declared income is reasonable. Pricing may be higher than prime lending because verification is less conventional.
What is a lease doc commercial property loan?
A lease doc loan relies primarily on rental income from the commercial property to support the debt. It is generally used by investors buying or refinancing a tenanted office, warehouse, retail property or other acceptable commercial asset.
The lender examines the rent, lease term, tenant quality, outgoings and interest cover. Some products may still require limited information about the borrower, but full business or personal financials may not be central to the assessment.
Prime vs alt doc vs lease doc
Choose prime when complete financials clearly support the loan. Consider alt doc when the borrower is self-employed and current income is stronger or easier to demonstrate through alternative records. Consider lease doc when a sound commercial property and its lease generate enough income to service the facility.
The best option is not always the one with the least paperwork. Interest rate, loan-to-value ratio, fees, lease risk and future refinancing flexibility all matter. Flexdoc compares commercial property lenders and structures finance around the borrower, property and ownership strategy.
Speak with Flexdoc about your commercial property loan options.
This article provides general information only and does not constitute financial, legal or taxation advice.