When it’s time to secure a commercial mortgage for that property you’ve been eyeing, you want to go into the process on the right foot. Ensuring that your commercial mortgage package features the necessities is of the upmost importance. It very well could mean the difference between securing a commercial mortgage and being left out in the cold; it will also provide you with leverage to refinance if you’re aiming for a lower interest rate. Keep these six things in mind when putting together an effective commercial mortgage package.
Net worth statement
A net worth statement is exactly what it sounds like: a rundown of the property you own along with debts owed. It’s a simple listing that tells the lender right off whether or not securing a commercial mortgage is feasible for your situation. Use CIBC’s net worth worksheet to get a sense of what your net worth actually is.
Income and balance sheets for the last two years
If you’ve been keeping up with your financial documents, this is where your diligence is going to pay off. Make copies of the last two years of your income and balance sheets and stuff them in a folder along with the rest of your other financial documents in the package. This will inform the lender as to how much of an investment your business is worth along with a detailed look its true profitability.
Notice of assessment for the last two years
Your notice of assessment (NOA) details how the CRA calculated your tax return. It’s important for your commercial mortgage package because it lists good information lenders can use to make an informed decision about your commercial property. It also proves that you’ve filed a tax return. If you’ve lost your notice of assessments, the CRA makes it simple to get additional copies.
Appraisal of the property
Be sure that an appraiser specializing in appraising commercial properties appraises your property as well. A good appraiser will provide a wealth of data that ensures the commercial lender knows exactly what your commercial property is worth. Reach out to the commercial lender in question if you’re unsure where to find a good appraiser – they will point you to an appraiser they know will provide them with the information needed!
Environmental site assessment of the property
An environmental site assessment (ESA) essentially shows the environmental problems affecting the commercial property. Only do a Phase I ESA for your commercial mortgage package, which details the types of contaminants in the commercial property. Once done, the Phase I ESA will inform the borrower what must be done to remove all contaminants from the property. A professional will do this for you, and it’s a godsend to lender: seriously, a Phase I ESA that shows it is free of contamination will seriously make the lender feel confident with lending and/or refinancing. If it’s contaminated, work with the ESA professional to get it contamination-free.
Summary of use of property
This will detail how the commercial property is/will be used during the day-to-day operations. Be as detailed as possible to ensure there is no mystery as to what goes on in the commercial property. The less your lender is in the dark about the nature of the business, the more wiling they will be to award you with the resolution you’re looking for.
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