What fees/costs should I budget for?
There are a number of fees involved when borrowing for a business. To avoid any surprises, the list below sets out most costs to look for, although this may not cover everything as it depends on what the lending transaction you take up.
- Stamp Duty — This applies if you are buying property and is usually the largest cost outside of the actual property purchase. Stamp duty rates vary between state and territory governments and this also depends on the value of the property you buy. You may also have to pay stamp duty on the mortgage itself.
- Legal/conveyancing fees — Generally around $2,000 – $5000, these fees cover all the legal rigour around your property purchase, including title searches should you borrow in a company name or through a Self Managed Super Fund.
- Building inspection — This should be carried out by a qualified expert, such as a structural engineer, before you purchase the property. Your Contract of Sale should be subject to the building inspection, so if there are any structural problems you have the option to withdraw from the purchase without any significant financial penalties. A building inspection and report can cost up to $1,000, depending on the size of the property. Your conveyancer will usually arrange this inspection, and you will usually pay for it as part of their total invoice at settlement (in addition to the conveyancing fees).
- Pest inspection — Also to be carried out before purchase to ensure the property is free of problems, such as white ants. Your Contract of Sale should be subject to the pest inspection, so if any unwanted crawlies are found you may have the option to withdraw from the purchase without any significant financial penalties. Allow up to $500 depending on the size of the property. Your real estate agent or conveyancer may arrange this inspection, and you will usually pay for it as part of their total invoice at settlement (in addition to the conveyancing fees).
- Lender costs — Most lenders charge establishment fees to help cover the costs of processing their loans. We will let you know what your lender charges but allow for between 0.50% and 0.75% of the loan amount.
- Ongoing Lending Costs — For all business lending the funder will always include a monthly or quarterly fee, plus other charges depending on the type of product you take out. Each lender is different, so check with us beforehand to know exactly what you are paying for.
- Valuation Costs — If you are buying a commercial property make sure you allow up to $5,000 for a valuation. Valuers look at different factors when it comes to assessing the value of a commercial property, and this can take up to 10 working days to complete a report.
- Ongoing costs — You will need to include council and water rates along with regular loan repayments when purchasing a Commercial property. If there is no property security involved there may be some further legal fees or annual auditing fees to be charged for the security you provide.