Business owners have had to weather a series of challenges since early 2020. They’ve had to contend with restrictions and lockdowns, supply chain disruptions, changes in consumer spending habits and more. Many businesses have had to close permanently because it has been financially impossible for them to remain open. So, should they turn to a bank for a solution to their difficulties? Is that the most logical thing to do? The answer to both questions is yes and no.
Going to the bank for a mortgage, whether it is to help with staying afloat for the time being, helping with cash flow, or to raise investment to grow and expand, is not an easy thing to do at the best of times. During a pandemic, it’s even more challenging to secure a mortgage via a bank. Yet, business owners often only consider banks for mortgages, despite alternative funding options. Banks seem an attractive option because they offer a variety of financial services or better terms. Unfortunately, this seemingly easy solution is not just that –easy, and as business owners know, better pricing or access does not always mean sufficient mortgage amount, more flexible terms, lenient income approach, etc. There are very good alternatives to banks – alternative lenders, also known as B-lenders.
When to consider Alternative Lenders
Alternative lenders, like banks, are regulated, and must comply with laws federally and provincially. They provide a valuable service to businesses and individuals. Alternative lenders, also known as B-lenders, are an in-between option for those who are not ready to consider private lenders. However, business owners should consider alternative lenders alongside banks for two reasons:
- Alternative lenders are often able to provide terms that fit the needs of a business better than a bank. They also tend to offer more flexible terms. Business owners should consider all the options available to them before making the financial decisions about which avenue to pursue for their mortgage.
- Businesses that have failed to secure a mortgage via a bank have this second set of options, which could turn out to be even better
If you are interested in alternative lending, there are specialists who help businesses and their owners secure mortgages through alternative lenders. Better still, there are brokers who help businesses secure mortgages through banks and alternative lenders. The reason contacting a broker is a good idea is that they can find you the A-lending and well as B-lending options that a given borrower is eligible for. Brokers can also get you started with an alternative or private mortgage and move you to a Monoline Lender or to a bank down the road. GreenFlow does just this as we offer diverse options through over 50+ banks, monoline lenders, credit unions, trust companies, and exclusive private investors and lenders, to find an option that best meets your situation.
By having bank and alternative financing options, business owners can choose the option that best fits the needs of the business. A business can secure a bank loan but find that they get higher mortgage amount, better facility, more lenient approach to income, shorter term, etc. from an alternative lender.
Alternative Mortgage Lender Solutions
There are benefits to considering the solutions alternative mortgage lenders provide, not least being the fact that alternative mortgage lenders typically take a more specialized approach than banks:
- Bruised credit? Alternative mortgage lenders are more tolerant than banks when it comes to bruised or damaged credit history. Whilst borrowers with high credit scores will get the lower rates, if you’re looking for a mortgage but have a low score, previous bankruptcy or consumer proposal, there is hope with a B-lender.
- Self-employed? Freelance business? Alternative mortgage lenders are more openminded. Banks will typically want proof of income such as Notices of Assessment and T1 generals for the past 2 years. Alternative mortgage lenders will consider the following sources of income: commissions, freelance work, contracts, and tips. As long as they it can be proven via business or personal bank statements, alternative lenders will consider it. This approach is not the same for commercial mortgages. Alternative lenders mainly consider the rental renew of a building for commercial mortgages.
- Stressed about the stress test? Banks limit themselves to standard debt service ratios. Alternative mortgage lenders, which are provincially regulated, don’t use the stress test as the benchmark to qualify a borrower. They are also far more flexible than banks if the mortgage amount is large.
Whether you’re the owner of a new venture, self-employed or the owner of an SME, when it comes to mortgages, you should consider alternative lender options. By focusing on banks and excluding alternative lenders, businesses ignore solutions that would be better suited than what a bank can offer.
Consult a specialist at a brokerage that specializes in helping business owners and self-employed individuals secure mortgages. We can assist you with a variety of issues. These range from - but aren't limited to - helping if you’re facing cash flow problems, need financing beyond a bank’s mortgage offer, or need quick financing solutions.