1The LTV Formula
Banks calculate your loan amount using this basic formula:
Valuation vs. Price
If you buy a factory for S$2,000,000, but the bank's official surveyor values it at S$1,800,000, the bank applies the LTV ratio to the lower valuation.
The Funding Gap
In the scenario above, an 80% loan on the S$1.8M valuation gives you S$1,440,000. You must pay:
- The S$360,000 downpayment (20% of the valuation)
- Plus the S$200,000 cash gap between the purchase price and the valuation
2How Remaining Lease Compresses Your LTV
Unlike residential properties where LTV is mostly determined by your age and existing loans, industrial property LTV is heavily tied to the remaining lease tenure of the factory.
3Step-by-Step: Purchasing a S$1,500,000 Factory
If you purchase a B1 or B2 industrial unit with a 40-year remaining lease, valued exactly at S$1,500,000, with a maximum 80% LTV, your capital layout works like this:
4Factors That Can Lower Your LTV
Banks will instantly drop your LTV below 80% if they perceive higher risk:
Borrower Profile
Buying under a newly incorporated company with no financial track record or revenue will result in a lower LTV (often 50%–60%), or require directors to provide personal guarantees.
Existing Debt
Banks evaluate your company's Debt Service Coverage Ratio (DSCR) or your personal Total Debt Servicing Ratio (TDSR). If your cash flow is tight, they will lower the loan quantum.
Property Type
JTC-managed land or specialised, single-user factories face stricter borrowing caps compared to standard strata-titled ramp-up units.