When you have the vision to start or develop your business investment properties, commercial loan financing can seem like the brick wall between you and your vision. Whether you are an entrepreneur or the director of a small or medium-sized business or whether you would just like to finance the purchase of a restaurant or apartment building, you would be well advised to avoid putting all your financial eggs in one basket, especially when it comes to taking out a commercial mortgage loan with a bank that does business in the Atlantic Provinces.

Why is it so difficult to arrange financing? There are a multitude of reasons that I’ll outline below. You can overcome many hurdles by dealing with a qualified mortgage broker who can seek financing through many avenues.

Centralization of Processing

Your 20-year relationship with your local branch might not be worth what you thought. In the last decade, more and more decision making power is being centralized in major centres. Most people do not realize that the approval for your residential or commercial loan is ultimately made by a person sitting in an office building in downtown Toronto. Your local bank manager often has little power to influence the decisions.

The person underwriting your loan may have no idea what access you have to local markets or how close your business is to major population bases. These are things that cannot be taken for granted.

Lenders’ criteria

Some lenders simply just do not finance certain types of operations. They either do not have the understanding and tools necessary to determine loan risks for your type of business or have simply determined to not enter a market do to population. Your financial status will also have to meet a set of very specific selection criteria.

A mortgage broker can pre-qualify your loan by determining what lenders would have a tolerance for your type of business and where your best options lie.

Lenders’ finance based on predetermined quotas and their existing loans outstanding

You may have heard that a lender may have financed operations like yours in the past, only to discover that when you come knocking they have no tolerance for your business. Often, lenders have predetermined lending amounts for a certain area. If you are a national lender, you often start the calendar year expecting to lend a certain amount to the Atlantic Region, Newfoundland, or St. John’s. Lenders can also shy away from being over-weighted in any one sector in a region. 

Consider this example: If the lender that you are dealing with has outstanding loans with several sawmill operations in your region, then it might be less willing to lend to your region or sector because of the existing build-up on the books. In fact, if these loans are performing poorly, it would be an automatic red flag on you, even if the reason for the other operations failure might be because you are winning business contracts from them.

On the contrary, some lenders that have not had many dealings in an area may be seeking to diversify its portfolio. We have at times been the first point of contact for lenders seeking to lend in an area.

Small and medium sized loans are too much work

Lenders have often made the small business market the first to be cleared of their books as an unproductive market. Getting a commercial loan for your restaurant business, despite all your experience, and a substantial downpayment is often harder then financing your home of equal or greater value, with no money down. Lenders consider your home loan more secure then your business, despite the fact that you have good credit and would not be willing to let either of them go. It can seem like quite the conflict when your bank has gladly lent you money for your home or auto purchase, but shies away from your business.

There are lenders available that will trust your experience and good credit history as assets that can make you excel in your business. Some can even offer a simplified application process whereby an appraisal of the property, up-to-date taxes, and your own credit can be all you need to get the ball rolling.

The need for multiple streams of financing

When you enter into a project or expand your business you may be best served by multiple lenders. One lender might serve you well in refinancing that multi-unit residential to create the downpayment for the multi-use office and light industrial unit, while you get leasing through another lender for the necessary equipment. It can take a well coordinated effort of multiple lenders in order to orchestrate such a project. One lender may not be well suited.

The solution

The solution in today’s market is seeking out a professional with the experience and knowledge to use multiple resources in your financing effort. While banks constrict their business and downsize their branches, entrepreneurs and directors pay the price. An independent broker can provide “boots on the ground” for a lender that would not generally want to incur the expense of putting in an office and an underwriting staff in the region. By dealing with a broker, lenders incur little costs until the decision is made. A broker can look at the whole picture of your business to understand what forms of financing would work and what lenders would have an appetite.

The difference is in the details. With most lenders looking more and more alike, a broker provides the differentiation necessary in order to expediently find the best options available.

Loans Financed

CMHC Insured Mortgages

Conventional Mortgages

Mezzanine Financing

Retail

Multi-unit Senior including congregate care and assisted living facilities

Apartment building and Condominium

Office

Industrial and Warehouse

Hotel

To apply for a commercial mortgage, or to find out more about commercial mortgages, contact us at Commercial@YourLendingPartner.com.