A commercial file is not approved or declined. It is structured until it works, or until it clearly cannot. The desk does the structuring with you, and says why, so the next one needs less help.
Residential files fit or they do not. Commercial files get shaped. The lender's leverage is capped by what the property earns, the borrower wants more than that, and the gap is closed with a second mortgage, a vendor take back, more equity, a holdback until leases are signed, or a different lender with a different view of the income. Structuring is the craft of finding the combination the lender will fund and the client can live with.
The lender applies both and lends on the lower. On income property the coverage test usually binds, which is why a $3 million building may only carry $1.8 million of debt no matter what the appraisal says.
Five year terms on twenty five year amortisations are common, but a lender may stretch amortisation for a strong asset or shorten term for a transitional one. Each changes coverage, so each changes the loan.
A private or vendor second behind the first to close the gap, priced for its position, sized so the combined coverage still works.
The seller carries part of the price. Common on business purchases and on buildings the vendor knows well. Lenders have views on how much they will sit in front of.
Funds held until a vacant unit leases or a renovation completes. Turns a decline on vacancy into an approval with conditions.
Other property the borrower owns, or a corporate or personal guarantee, used to support leverage the subject property cannot carry alone.
A client is buying a $3.2 million eight unit building with $800,000 down. Net operating income supports $2 million of conventional debt at a 1.25 coverage. The $400,000 gap is closed with a vendor take back at a rate the vendor accepts, sized so combined coverage stays above 1.10 and the first lender agrees to the second in position. The client closes. Without the structure the file was a decline.
You send the scenario. The underwriter runs the numbers, proposes a structure and walks you through why each piece is there. You take it to the client, and the desk joins the call if the conversation is technical. On your first files the desk does most of the structuring. By your fifth you are proposing the structure and the desk is checking it. Read commercial deal types for the asset classes and the DSCR check to test coverage before you send anything.
Part of the Commercial Deal Desk. Previous: lender access. Next: underwriting.
Book a discovery call and bring the numbers. The desk will show you the structures that could make it work.