Commercial Mortgages - Canadian Financing Solutions

'Commercial Mortgage Financing is a challenge '! One of our clients recently commented. We certainly agree, but there are solutions, options, and strategies for the Canadian business owner and financial manager who invest time to investigate the proper commercial mortgage financing alternative for their Canadian business.

The 2008 and 2009 financial crisis, (worldwide by the way!) affected every aspect of financing. Many financial people still believe the commercial real estate financing still has the ability to become more problematic. Only time will tell on that one, but in the meantime, if you are properly prepared, and you know which solution you need there are still some great alternatives for Canadian business owners. In the context of our article we are discussing owner occupied commercial real estate.

When clients come to us to discuss their commercial mortgage financing needs they have some very specific needs that can neatly be put into a couple categories -

1. They wish to purchase a building versus their current ' lease ' arrangements

2. They wish to re finance their current premises

3. They wish to re do a first, or get a 2nd commercial mortgage to undertake leasehold improvements, expansion, or finally - to use the additional funds for working capital , cash flow, and other forms of possible debt repayment .

For the last several years, prior to the current challenging environment much transaction could be financed at greater than 65% LTV - By LTV we mean of course loan to value, i.e. how much you can finance against the appraised value of the property.

We are happy to point out that there are some circumstances in which financing for up to 90% LTV, in some cases 100% still exist, but they are clearly the rarity, not the norm.

The greater equity or down payment requirements of course put additional challenges to the Canadian business owner who must give up that equity or alternatively make a greater down payment.

While we find that many of our clients are never totally familiar with all their business financing options we can also state they are even less familiar with their commercial mortgage financing options on their business properties.

That is where it is absolutely recommended that they work with a trusted advisor who had credibility, experience and a track record in this area. Planning also helps by the way, and we encourage the customers who come to us to allow 30-60 days for a typical commercial financing from the point that they walk in our door.

Key information required to assess the best Canadian commercial mortgage financing alternative is the facility description and any appraisal, as well as your financial statements. We find it is of great value to ensure these statements accurately reflect your ability to pay back the new financing. Therefore cash flow coverage, interest coverage, etc are all key parts of the equation. Naturally if you are leasing premises and are going to an owner occupied facility which you are financing the lease costs you are paying now factor positively into that equation.
There are currently some very solid commercial mortgage financing alternatives, for both first and second mortgages. Each business owner has different focus on their ' hot points ' , whether that be loan to value, simply getting approved, ensuring the amortization is long enough, or even flexibility to pre pay or re finance .

Is it ' easy ' to get commercial mortgage financing in Canada? We would say no, is it possible and very achievable with the right data and advisor - absolutely. The right financing will only enhance your owner occupied facility and ensure you are building business or personal equity.