Do You Need a Private Mortgage For a Commercial or Residential Property?

For businesses struggling to maintain positive cash flow through the back stretch of the current recession, private mortgage loans can be the best short term financing solution.

If you’re a business owner, you may have found the current recession to be very challenging in 2009. Many Canadian businesses have experienced a drop off in sales and a strain on capital resources as they try to manage through the recessionary slow down effects.

For well established businesses with long term banking relationships, they may find themselves now offside with lending covenants, overdrawn on working capital credit facilities, and getting pressure from the bank for repayment of arrears or even a demand to be paid out.

Yes, despite sometimes having a 10 plus year relationship with a commercial lender, one bad year, especially in a recession, will cause the lender to end the relationship.

With the business feeling there are better days ahead, refinancing is required, or at least additional financing to inject cash flow into the operations.  But because of the most recently completed year being sub par, and credit perhaps getting strained, an institutional financing option is not likely going to be available and if it is, it will be hard to find.

When the business owns commercial and/or residential use real estate, the solution more often than not is private mortgage loans.

And while a private lender may look at a lot of the same financial information that an institutional lender does, they tend to be able to look past the obvious bumps in the road and become more focused on the future ability of the business to repay borrowed funds.

From a cash flow point of view, private mortgages are typically interest only, so even at a higher rate of interest, cash flow required for repayment can be quite similar to a conventional bank mortgage due to the fact that no principal is being repaid.

The business will secure private funds for one to two years, allow operations to get back on track, then return to the banks for cheaper money.

This may seem like an unnecessary and costly step for a well established business that’s gone through a tough stretch.  The hard reality is that this scenario is playing out almost daily in the early days of 2010 as businesses try to get back on track from a tough 2009.

Private Mortgage Lenders end up being the white knight in many of these situations allowing the business to continue on without disruption.

If you have a business in a similar situation, please give me a call so we can go over your situation together and discuss what mortgage options may work the best for your needs.

Click Here To Speak With Canadian Mortgage Broker Joe Walsh

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