The Commercial Mortgage Financing Story
“Every Commercial Mortgage Financing Application Has A Story The Needs To Be Told In Order To Get Approved For Funding”
Commercial mortgage financing is like any other type of business financing in that there needs to be a beginning, a middle, and an end that makes sense.
Sometimes the story is fairly easy to tell and sometimes it can take quite a bit of explaining and supporting documentation to get a lender comfortable with the situation.
Because basically all commercial mortgages are customized financing facilities to some degree due to the fact that every property and every supporting cash flow stream is different, its always going to be important for a lender to be able to wrap their head around why financing is required and why it would be in their interest to provide it.
Especially when you talking about a bank or institutionally provided commercial mortgage, the specifics of the story are going to be important and need to hold water during the entire loan application and review process.
Private lenders that provide commercial property financing are also interested in the basic story to make sure that they are not getting into situation that they may regret later.
Instead of just referring to the beginning, middle, and end of a story, lets get a bit more specific.
A commercial mortgage lender is going to want to know the current status of the property which is explained through appraisals, environmental reports, pictures, and so on. They are also going to want to know about the repayment source of the mortgage which is going to be supported by rental agreements, historical financial operating statements, contracts, etc. Lets call this the beginning.
Or another way of putting this is the current status of applicant and property.
The second phase, or middle of the story is a summary of the both the property’s and borrower’s backgrounds … how did you get to this point in time and how did the present commercial financing need come about.
The third phase, or end of the story is focused on how a mortgage will be repaid over time and the exit strategy for the lender. The end of the story, or where are we going from here phase will need to relate to how the property and mortgage fits into the bigger scheme of things.
For instance if a business is acquiring a commercial property for one or more of its operating entities, all these different divisions of a business can have dynamics that will impact a commercial mortgage either directly or indirectly.
Yes, there are commercial mortgage requests that are very straight forward…but most are not, and its the ability to tell a complete and comprehensive story that can make all the difference between getting financing and not getting financing.
There are business owners and managers that believe they don’t need to tell a comprehensive story and try to control the information that is disclosed to a lender. While this approach can work, it can also backfire as well as any confusion or uncertainty with the information provided will most likely lead to a decline of the application.
This is also where a good mortgage broker can be invaluable to you in putting an application for a commercial mortgage together where the story is told clearly and in an order or sequence that will be well received by a commercial mortgage lender.
If you have a commercial mortgage financing requirement, I suggest that you give me a call so we can over over the details of your capital needs together.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel