Small Business Solutions
Commercial mortgages and business financing.
If you are looking to take the next step in your business and go from tenant to landlord, we can help!
A commercial mortgage is a loan taken out on commercial real estate, where the property is used as collateral. The borrower is generally a company or business as opposed to an individual. Said business may be a partnership, a limited company, or an incorporated business.
With commercial mortgages, assessing credit history is more complicated than with residential mortgages, and rates tend to be significantly higher than residential rates due to the increased risk.
We have access to a wide range of lenders who can help with:
- Financing to buy/sell a business
- Business lines of credit
- Business credit cards
The needs of each business are unique and so we will work with you to determine how to best help you reach your goals.
Commercial mortgage products typically provide funding for:
- Income properties
- Multi-unit residential properties
- Bridge financing
- Industrial properties
- Office buildings
- Self-storage facilities
- Retail malls
- Raw land
- Debt consolidation
If you choose to pursue a commercial mortgage, there are specific criteria that you will have to satisfy. The bar is set quite high for such mortgages, as the value of loans is considerably higher.
- Debt service coverage ratio: This is the main criterion that lenders will look at and is essentially the ratio of cash available to the required loan payments. Most lenders will apply a loan-to-value ratio and will expect you to invest some of your own money into the purchase to balance the odds.
- Credit history: Most lenders will require a good personal credit score from applicants as well as evidence that the business itself is creditworthy. There are some lenders that may accept applicants with a less-than-perfect credit history, but not many.
- Current business conditions: If your business is up and running, commercial lenders expect your business to be profitable and steady. You may need to provide your business plan and financial projections to ensure that you will be able to make your payments on time. Some lenders may have a minimum net worth requirement of between $100,000 and $200,000. Funds should be in liquid form (e.g.e.g., RRSP, cash, or stocks etc.) as opposed to in equity.
- Type of business: The terms of a commercial mortgage are dependent on the type of business as well as the type of property being sought. As this is a complex legal terrain, it is advisable to acquire a specialist—either a solicitor or chartered surveyor—to advise you.
- Down payment: A higher down payment is expected of a commercial property. A typical down payment on a mixed property falls between 20 and 35 percent. A pure commercial property is typically higher, near 50 percent. Your risk profile directly determines the down payment required.