Commercial mortgage financing and commercial loans in Ontario are specialized fields of financing.
If you operate a Corporation, you would hire a Chartered Accountant to file your tax returns; and not a general accountant.
In that same vein, if you need to apply for commercial mortgage financing or a commercial loan, it is best that you deal with a Mortgage broker who specializes in Commercial Mortgage financing. If you are a Mortgage Agent or Broker who specializes in residential mortgage financing, you too can benefit from the guidance of a Mortgage Broker who specializes in Commercial Mortgage Financing.
To be approved for a Commercial mortgage, the lender will require a lot of information to process the application. You will need to:
- Provide an explanation of what you are seeking to accomplish through the Commercial Financing
- Provide the desired loan amount
- Indicate if you are requesting debt, equity, or both
- Provide a complete property description that includes the location, size, current entitlement status
- Provide status of approvals including correspondence
- Indicate the amount of funds that are actually needed for the project and the percentage of the project these funds represent
- Indicate the amount the borrower is going to invest in this project
If the project involves real estate development, you will be required to provide:
- A list of the hard and soft costs for all phases (provide a spread sheet with a detailed construction/servicing budget)
- The future value upon completion
- Project time frame
- Rate of absorption
- Total build out
If there is a retail or office component to the application, you will also have to indicate pre-leasing information and provide a rent roll. Leases will be required later.
If the Commercial Mortgage is required to purchase a commercial property you will also need to know the purchase price, down Payment amount, seller carry, contract/REP- C expiry date.
You will also need to provide:
- Use of Funds - (Or provide a spreadsheet)
- Projected cash flow noting sales and estimated draw down on construction facility
- Pro – Forma Income statement
- An explanation of the business and/or borrower’s financial history for the past 3 years
- Previous operating history, if applicable and a list recent projects
- A P&L for the business if one is available
- Personal financials for the borrower
Finally, you will also have to indicate:
- Whom is signing the loan
- Any critical dates that must be met for this project
- If there is an appraisal. If yes, the date of the appraised value. If there is no appraisal how was the value determined?
- If a 3rd party independent feasibility study or appraisal was completed
- If other properties can be used as collateral. If so, what is the type of property, value and are there any existing liens?
- Your credit status. Do you know your credit score?
It is clear that obtaining approval for commercial financing in Ontario is quite an undertaking . Seek the guidance and representation of a professional who specializes in this field. For more information please visit www.firstequity.ca or call David Mandel 416 440 1224 ext. 24.
