Commercial Mortgages and Loans for Start-ups and Established Businesses

Canadian banks and credit unions offer mortgage solutions to small and large businesses, start-ups, and corporate entities. They are designed for investors and businesses that wish to finance or purchase commercial properties, equipment, income producing, expansions, and so on.

Criteria and Requirements The criteria vary from bank to bank. Some establishments offer financing for the purchase of multi-residential, retail, commercial, office, industrial, and multi-purpose properties. Both fixed rate and variable rate products are available. In some cases, borrowers are allowed to convert their variable rate mortgage into a fixed rate loan.

Types of Lenders Generally, loan providers can be divided into banks and non-bank lenders. The latter offer residential and commercial mortgages, with a range of financing options available. Borrowers can choose from floating rate programs, mezzanine financing, small loans programs, conventional and multi-family financing, and more. Non-bank lenders offer equity and mezzanine financing in the form of interim and construction loans. These products are designed for real estate owners, builders, and developers.

Types of Mortgages
Financing is available to both established businesses and start-ups, with different products to choose from. Mortgages are offered in the form of start-up and raw land financing, loans for retail, rental, and industrial properties, as well as bridge financing. Farmers are offered agricultural business mortgages for land that is zoned agriculture. Financial institutions provide a series of small loans which means that customers re-borrow against their existing mortgage. They can choose between variable and fixed interest rate. Borrowers also benefit from a lower interest rate if they choose a shorter term.

Solutions for Start-ups and New Businesses While the financing options are more limited if you are a start-up, there are programs and products available. Financing is offered under the Start-up Financing Program, Market Expansion Financing, and Canada Small Business Financing Program. The latter offers loans to businesses only, i.e. non-for-profits and religious and charitable organizations do not qualify. These loans are offered for the purchase of equipment, leasehold improvements, vehicles, commercial properties, and land. The funds can be used to make improvements. However, the loan cannot be used as a source of working capital or to pay franchise fees, finance goodwill, and so on. The main benefit for applicants is that both large and established businesses and start-ups have equal chances. Another benefit is that it is easy to apply. Borrowers can apply through their caisses populaire, credit union, or bank. There is a registration fee, but applicants benefit from a low interest rate.

Uses of Commercial Mortgage Financing The funds can be used for commercial buy to lease, retail units, office accommodation, and industrial properties such as factories and warehouses. Loans are also available to finance the purchase of leisure industry properties, fast food joints, restaurants, B&B properties, and guest houses. Businesses apply for commercial mortgages to finance the purchase or building of hotels and pubs, as well as land for development.

Business loans are also offered for debt consolidation and the purchase of business properties by tenants. Financing is also offered to business owners who seek to buy their partners’ shares. Finally, borrowers can use the funds for the refurbishment or expansion of a commercial property. The amount offered varies from bank to bank and is based on different factors such as the loan to value ratio, the deposit, the value of the property to be purchased, and others. In most cases, the LTV ratio is up to 75 percent of the property’s value. Some financial institutions, however, offer up to 90 percent LTV.