a large white commercial buildings with lots of windows

How Does Commercial Mortgage Work in Kingston?

If you’re planning to step into commercial real estate, planning matters the most because that will directly impact how your business grows. While the concept of commercial mortgages is similar to residential mortgages, you are subject to more scrutiny by lenders. They are also subject to higher interest rates since lenders term it risky, so you should have all business documents and paperworks handy before applying for a mortgage. 

What is a Commercial Mortgage?

A commercial mortgage is a specialized loan used to purchase, develop, or refurbish business property. Unlike residential mortgages, which are typically secured for buying homes, commercial mortgages are geared towards properties used for business purposes. These properties could range from office buildings and warehouses to retail spaces and factories in Kingston and beyond. 

Why consider a commercial mortgage? 

Owning a property is always better than renting a property and paying someone else’s mortgage. Here are more reasons why you should consider getting a commercial property for your business:

  • Potential for Rental Income: You can lease parts of the property to other businesses and recover some cost of the mortgage. 
  • Tax Benefits: Owning commercial property offers you many tax benefits such as deductions for mortgage interest, property taxes, and other operating expenses.
  • Control Over the Property: You can paint, modify, and renovate the space your business’s needs change without having to ask anyone’s permission.
  • Capital gains: Over the years of owning the commercial property, you’ll make significant gains and sell for a profit. 
mortgage application form on a table with a pen on top.

How Do I Apply for a Commercial Mortgage?

To start, you’ll need to provide detailed financial records, a business plan, and projections that demonstrate the potential profitability of your business venture. Start the process by choosing a commercial mortgage broker in Kingston, who will also help you with documentation including personal financial statements, the business’s financial statements for the past few years, and details about the property. 

Your mortgage broker will help you submit applications to multiple lenders and negotiate to get you the best terms and rates. Make sure to conduct a property appraisal to confirm its market value and the potential for income generation. Once your application is submitted, lenders will assess the risk by looking at the loan-to-value ratio and the debt-service coverage ratio. 

How to Get Approved for a Commercial Mortgage Swiftly?

To expedite your commercial mortgage approval, ensure all your paperwork is complete and well-organized. Lenders appreciate clarity and thoroughness, which can speed up their decision-making process. It’s important to showcase a strong business plan with clear, realistic financial projections. Here are some more tips: 

  • Maintain a Good Credit Profile: Work on building and maintaining a strong credit history for both personal and business finances. Address any credit issues prior to application to improve your credibility to lenders. 
  • Offer a Substantial Down Payment: Put down a bigger down payment so the lender feels a reduced risk and get you approved at a lower interest rate. 
  • Work with a Commercial Mortgage Broker: A broker can help navigate the complexities of the loan application process, negotiate terms, and connect you with the right lenders.  
  • Be Proactive with Lender Concerns: Lenders will have questions for you, so be proactive and get back to them quickly. At the same time, make sure to provide many documents as necessary so there’s less back and forth. 

Leo Ragusa is one of Kingston’s most trusted commercial mortgage brokers and is here to support your entrepreneurial journey. Book a free consultation with him today.