As usual we are talking about the outlook for commercial mortgages and loans, in the beginning of the year. Half of this article will talk about the outlook for commercial mortgages in the eyes of our analysts for the 2016, and the other half of this article will concentrate on other commercial loans such as small business loans, corporate debt, operating lines and inventory and factoring.

The beginning of 2016 started with the turmoil on the stock market, mostly driven by oil slide and Chinese currency risks. This turmoil pushed the bond markets up driving commercial mortgages rates up substantially. Variable rate clients are thinking of locking their rates in order to save on interest in case of further turmoil. WeCanFinancial and our team sees some correction over last couple of days and long term outlook should also correct what happened during the hot first weeks of 2016. For our clients who are going through business plan stages, we are already pricing a higher mortgage rate for the next 12 months, with further decrease in rates in 2017 and possibly into 2018. Entrepreneurs worried about development plans written prior to turmoil our advise is to wait with financing for at least a month or two, in order to fit into the projections with market outlook post correction.  Our current price meter sees commercial mortgage rates at 4.0%-4.5% for 5 year variable/fixed combinations, which is approximately 0.25-0.35 basis points higher than the pricing we were quoting at the end of 2015. As usual the importance of properly prepared business plan is self-evident during this tough time, and a lot of our clients from 2015 already called and sent us emails, with thanks for planning 2016 well, with enough cash reserves on the books to account for higher financial costs.

WeCanFinancial continues monitoring the situation on the corporate debt market, and small business loan market. The financial turmoil pushed the pricing of the corporate debt by 0.5% in 2 weeks since the beginning of the new year, making average pricing of 5.0%-6.0% for  well capitalized companies, and 8.0%-9.0% for companies that show going concern. Our small business loan clients and entrepreneurs in the highest growth spaces, are worried about the changes and are trying to close fixed interest products at this time much more often than variable. This is a significant shift from the beginning of the 2015, where variable product was the most sought one. Small business loan limit with some lenders in Toronto, went from $250k-$750k, which is a sign that lenders are moving with a pace of time, and some realized that $250k limit for small business loans don’t give anyone any favours not to banks not to borrowers. Our team advocated for increases for last 3 years and feel partially responsible for these moves with several close lenders. WeCanFinancial already is in process of several small business loan applications requesting $750k per loan. Corporate debt lenders are keeping their guidelines very tight. With debt service rations as high as 3.0 many corporations simply can’t qualify for anything meaningful on the street. Our vision that more and more short term corporate cash stores will be opeining doors in Ontario, cashing credit card receivables, and providing 3% per month loans to clients looking to tap into additional sources of short term cash. Our team very rarely in our business planning and conversations with our clients, offers such expensive monthly services, but it seems that reality sets on everyone without exceptions and in 2016 corporate “money-marts” will have a new high both in numbers of new locations and also business volume.

Credit requirements for business owners are not going to tighten in 2016, since its tight enough anyways.  700 BCN score is a new real minimum score for any business owner to qualify for funding for last several years, and we see that overall Canadian business owners score levels are below the 700, which means that natural selection process for the banks is more important than the substance of the application or the business or personal circumstances of the business owners.

WeCanFinancial will continue info articles for all of the subscribers and in the meantime we wish Happy Financing to every one.