Commercial mortgage financing in Canada was exceedingly difficult to obtain based on the rates, terms, and structures that were sought for by Canadian business owners and financial managers. The 2008 and 2008 worldwide liquidity crisis clearly dampened commercial real estate lending in Canada.
Let’s focus on the commercial mortgage financing for Canadian firms who wish to either purchase property for new locations or expansion, or in some cases re financing current property based on existing company needs for working capital, etc.
Commercial mortgage financing in Canada is somewhat fragmented based on financing done in this sector of Canadian business. In our opinion current the best financing available for commercial first and second mortgages lies with a handful of select institutions who offer competitive rates and higher L T V. LTV is of course the acronym for loan to value, which specifies that per centage of financing your firm can obtain based on the value of the building / property .
When we meet with business owners to discuss why they are looking to either finance or re finance a facility the basic needs are as follows:
- Purchase a property that is currently leased
- Make significant improvements to a currently owned facility
- Re- finance a first mortgage that is coming due
- Acquire a commercial 2nd mortgage for additional working capital purposes
The general rule of thumb for Canadian commercial mortgages has been 65% Loan to value. As we discussed above that implies that if your are purchasing or re financing a one million dollar building you should be able to obtain financing in the amount of $650.000.00.
That obviously puts the onus on the borrower, your firm, to come up with a combination of equity and down payment that allows you to finalize the financing.
So is that the best deal that a Canadian firm can currently achieve in the 2010 financial environment? Absolutely not – there are a number of situations that allow your firm to get in some cases up to 90% and 100% financing on a building.
This is achieved primarily through government related programs that are generally not known to the average Canadian business owner or financial manager.
Our clients often ask us ‘how long will it take to put a commercial mortgage financing in place, and what is involved ‘. In our experience, with the full co operation of our customer it generally takes 30 -45 days. That of course necessitates planning in advance, especially if you are under some sort of deadline such as a renewal notice, etc.
We encourage Canadian business owners who are looking for commercial mortgage financing for a variety of purposes to ensure they have a clear and positive story in place. Our practice has been to sit down with a client, clearly reference the need and best solution, and we then put a clear package in place demonstrating the viability of the financing. That includes a combination of business and financial documents such as a summary of the business, the financials, and most importantly a cash flow analysis. We want to be able to clearly demonstrate that either the first, second, or both mortgages (if that is the solution required) can be repaid over time.
Commercial Mortgage Financing in Canada – challenging? Yes! Achievable ? Absolutely ! Work with a trusted , experienced and credible advisor who will allow you to achieve your goals and needs in this area of Canadian business financing .
Stan Prokop - founder of 7 Park Avenue Financial -
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details - tel 905 829 2653
