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For all that they lend huge amounts of money to Fortune 500 companies, mainstream banking people are not known for their excitement about financing ICI property purchases. When they do readily approve a loan application, the security for it is more likely to be the buyer's home than the proposed acquisition itself. Perhaps it's better for lenders to stay on the safe side, but there's never really been a keenness on sharing a business or investment risk. Moreover, it's known that, when there is a residential default, a sale will ensue fairly quickly, whereas experience shows that the disposal of a commercial or industrial building, let alone a business (whether in owned or leased premises), can take a long, long time.
A range of alternative financing sources and methods have therefore emerged. They include lending institutions that see market opportunities that the banks leave open to them; various (sometimes highly) specialized funding people (e.g. venture capitalists); and, not infrequently, the sellers themselves. To a degree, too, there are some mortgage brokers who have more than the usual access to commercial lenders.
Often, of course, the interest rates may be higher, although not always. But the difference is an ability to assess and perceive value and lend against it -- frequently with the basis being the same due diligence that a purchaser makes.
Getting approval
The key to obtaining whatever financing you need lies in a sufficiently developed Business Plan. Naturally, the rudiments of it will have emerged during your due diligence investigations (or certainly should have done), but a lender is going to want convincing that your anticipated revenue, expense, and profit figures are strongly supported by your findings.
Instead of viewing everything with caution -- as most banks will tend to do -- people who are willing to finance your proposal will endeavour to understand it as much as you do, and even more so.
You don't need to appear before them with cap in hand, but -- if I may mix my metaphors -- your ducks had better all be in a row and in the right order.
Searching the Web
Although there's no real shortage of commercial lenders with websites, the page at http://www.mortgagesaver.org/sitemap.htm will lead you to what I consider to be a wealth of relevant information. It includes consideration of residential mortgages, but it also covers a host of less known -- and sometimes decidedly arcane -- aspects of the lending business. I think a visit to it is well worthwhile.
As far as creating a Business Plan is concerned, there's an excellent account that's been put together by the Canadian government and you'll find it at: http://www.cbsc.org/servlet/ContentServer?pagename=CBSC_FE/display&c=GuideFactSheet&cid=1081945275379&lang=en
Its main purpose is to help someone who's thinking of starting a business from scratch -- or is now ready to get some additional or new financing for it. For good measure, though, it can assist you in deciding what questions you need to ask and get answered during your due diligence exercise.
Any questions? Something not clear? Need more information?
Please feel free to contact me:
Phone: (905) 468-3154 / Cellular: (905) 704-9037
e-mail: ebb@iciniagara.com
Or use the feedback form on the Contact Me page.
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