Getting a commercial mortgage for your business requires different steps than taking out a residential loan. One reason is that the buyer isn’t an individual but instead is a partnership or a company. This means that banks have to run credit applications somewhat differently. Lenders tend to look at these loans as riskier propositions, which is why you’re less likely to find posted interest rates. Banks often issue interest rates for these loans on more of a case-by-case basis than they do with residential loans.
Finding Commercial Mortgages in BC
Commercial mortgages in BC are usually available for several different sorts of properties. Office, industrial and retail properties all require commercial mortgages. Companies and individuals purchasing residential real estate can use a commercial mortgage for the financing if they are purchasing it for the purpose of investment. These properties come in three categories: pure residential (1-4 units), pure residential (5+ units) or residential/commercial mixed.
Down payment is an important consideration when taking out commercial mortgages in Victoria, Vancouver or other smaller cities within BC. The highest loan-to-value ratio that is typically available for a commercial mortgage is for structures that are either multi-family residential (85%) or a residential/commercial mix (80%). Industrial properties and office complexes generally have a maximum LTV ratio of 75%, while mortgages for farmland often max out at 55% LTV. That means that you have to put the rest as a down payment. For example, if you’re considering a $2 million property, you’d have to put $900,000 down if it were a tract of farmland, but if it were a multi-family residential property, you’d only have to put down $300,000.
The time frame of commercial mortgages in BC can be confusing as well. Residential mortgages sometimes close in two or three weeks, but they don’t take longer than three months in most cases. Commercials can take significantly longer to close, ranging from two to twelve months.
How do you qualify for a commercial mortgage in BC? Lenders generally look at several metrics:
– Credit history — both for the owners of the business and the business itself
– Debt service coverage ratio — This is the ratio of the cash that you have on hand to the payments that you have to make each month to service debt.
– Present business situation — this involves presenting your business plan and financial projections. – Some lenders require a minimum net worth of at least $100,000 or even $200,000 in some cases.
– Type of business — In this area, it is best to consult a commercial loan specialist before proceeding.
Amansad Financial has helped many commercial clients in BC find the financing they need.
Contact Amansad Financial so that we can assist you in securing a commercial mortgage in BC. Our connections with various localized industry professionals and lenders mean that you will get the best deal with respect to the property that you have in mind. Get in touch with us today to get the process started.