Top 5 Questions People Ask When Getting a Commercial Mortgage

When you’re searching for a commercial mortgage in Canada, it can feel like there are more questions than answers. How do you qualify for a commercial real estate loan? How much financing can you get? What happens if a traditional bank turns you down?

At Sherwood Mortgage Group, we help business owners, investors, developers, and commercial property buyers navigate these questions and explore financing options that fit their specific situation.

Here are five common questions borrowers ask about commercial real estate financing in Canada.

1. What Types of Commercial Properties Can You Finance?

Commercial mortgage financing can apply to a wide range of property types, including:

• Mixed-use buildings
• Retail plazas
• Industrial warehouses and condos
• Owner-occupied and non-owner-occupied commercial properties
• Hotels, motels, and resorts
• Multi-family residential properties with 5+ units
• Land purchases
• Development and construction projects
• Construction-to-permanent financing

Sherwood also works with clients looking for commercial real estate investment loans and financing solutions for self-employed borrowers who may not fit traditional lending criteria.

Depending on the property and borrower, financing may be available through banks, credit unions, non-bank lenders, alternative lenders, and private commercial mortgage lenders.

2. How Does the Commercial Mortgage Process Work?

Commercial mortgage financing is different from a typical residential mortgage.

Lenders may look at factors such as the property’s value, projected or existing income, the borrower’s financial position, loan-to-value ratio (LTV), and debt service coverage ratio (DSCR).

At Sherwood, we focus on understanding the complete transaction before determining which lending options may be appropriate.

Our commercial mortgage process emphasizes clear communication, proactive updates, and helping borrowers understand the financing structure from application through closing.

3. How Much Down Payment Is Needed for a Commercial Property?

There isn’t one standard down payment for every commercial mortgage.

The amount of equity required can depend on the property type, lender, loan structure, borrower experience, income, cash flow, and overall risk profile.

Other factors can also influence the financing structure, including:

• Interest rate
• Loan-to-value ratio
• Debt service coverage ratio
• Amortization period
• Prepayment terms
• Fees
• Repayment structure

For first-time commercial borrowers, understanding these factors early can make it easier to determine how much capital may be required to complete a purchase or project.

4. What If a Bank Declines My Commercial Mortgage?

A bank decline doesn’t necessarily mean commercial financing isn’t available.

Traditional lenders may have specific lending criteria that don’t work for every commercial property or borrower. Depending on the situation, borrowers may be able to explore alternative commercial lenders, non-bank lenders, private lenders, or equity-based financing.

These options can sometimes accommodate situations involving newer businesses, properties with limited current income, unique income structures, or more complex transactions.

For example, Sherwood recently arranged a $4 million commercial loan for a startup industrial condo development using a pre-sale financing structure.

The appropriate solution depends on the property, borrower, transaction, and lender requirements.

5. Can Commercial Mortgage Financing Be Structured Around a Complex Deal?

Commercial real estate transactions don’t always fit into a standard lending model.

Depending on the circumstances, financing may include:

• Commercial bridge loans
• Short-term interest-only financing
• Property repositioning financing
• Blanket commercial mortgages
• Development and construction financing
• Private commercial mortgages

For example, a borrower acquiring a vacant retail plaza may need short-term financing to purchase and stabilize the property before securing longer-term financing.

A bridge loan with an interest-only structure and an appropriate term may provide the time needed to lease the property, improve its financial performance, and transition to longer-term financing.

Finding the Right Commercial Mortgage Solution

Whether you’re purchasing your first commercial property, expanding an existing business, developing a property, or looking for financing after a bank decline, the right commercial mortgage depends on more than just the interest rate.

Understanding the property’s financials, your borrowing position, financing requirements, and available lender options is an important part of the process.

At Sherwood Mortgage Group, we work with a network of commercial lenders to help borrowers explore financing options for commercial real estate purchases, investments, developments, construction projects, and more.

If you’re searching for commercial mortgage rates in Canada, commercial property financing, private commercial lenders, or a commercial real estate loan, our team can help you understand your options and determine what financing structure may fit your situation.

Looking for commercial financing? Let’s talk about your project and explore what’s possible.