With the Ontario economy growing and interest rates at historic lows, more and more businesses are looking to secure a commercial mortgage, whether it’s to expand their business or leverage equity. Those not familiar with commercial loans may be surprised to learn that the commercial loans are financed differently than residential ones.

The Need for Commercial Mortgages

Whether it’s for a retail store, hotel, gas station, special purpose property, construction site, vacant land, or bridge financing, businesses and investors take out commercial loans to purchase or refinance income producing, commercial properties.

The value of a commercial mortgage is usually considerably higher than a residential loan. A smaller commercial loan could range from $500,000 to $1.0-$2.0 million. Larger commercial mortgages can be arranged from $3.0 million to over $50.0 million and $100 million.

Qualification Criteria for Commercial Mortgages

In the wake of the global credit crisis and crash of the U.S. housing market, it’s more difficult to get a commercial mortgage loan today . In the past, it was not uncommon to secure a commercial loan with only a 15% down payment and a loan-to-value ratio of 80% used to be the norm. Today, Canada’s major banks would be hard pressed to lend any more than 75% of a property’s value.

For Canada’s big banks, to qualify for a commercial mortgage , the real estate must be multi-purpose, industrial, office, commercial, retail, or a multi-residential (5+) unit property. In addition, the property must be located in an active resale and rental market, and somewhere readily marketable. They will also require a current appraisal, passing environmental report, and may want a report on the condition of the building.

What Does a Mortgage Lender Look for in a Commercial Mortgage?

In addition to considering the property or purpose of the commercial mortgage, mortgage lenders will also want to look at the business and those operating the business. Is the business profitable and stable, and does it have a steady income stream?

Businesses that are heavily indebted, new, or struggling may find it difficult to secure a commercial loan. Lenders may also ask to see a business plan, financial statements and other projections and the person taking out the commercial loan is expected to have a strong credit history as well.

Canadalend.com has access to hundreds of private mortgage lenders and can help you secure commercial financing for business owners in Toronto, the Greater Toronto Area, and all across Canada for any amount. To see what kind of commercial loan you qualify for, contact Canadalend.com or apply online and a mortgage specialist will help set up an appointment at your earliest convenience.


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