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  • Writer's pictureDave Fuller

Commercial Bank Rate Survey - What You Need to Know about Bank Rate Right Now

Updated: Sep 16, 2023


Recently I was curious about where bank rates are going for purchases of commercial properties and businesses and so I reached out to some of my favourite bankers to see what they would say.

I sent each of them the same questions:

1. What is the going rate range now for business purchases?

2. Owner occupied buildings?

3. Investment buildings?


How much down is required for each?

Anything else you would like me to convey to potential investors about your programs?

Sweet spots you are looking to serve at the moment in terms of types of investments or industries?


Canadian Western Bank

I reached out to Sarah Trottier from CWB and her response was as follows.

Given every borrowing circumstance is unique with many factors being considered when it comes to pricing, it is somewhat challenging to provide a blanket rate to potential investors. However, below is some context and a range of pricing based on current market rates as of today:

Pricing can be impacted by many factors including but not limited to:

  • business sector/industry

  • loan to value being requested;

  • full relationship services with CWB vs. stand alone/one-off financing requests;

In general, the typical financing amount on income producing properties would be up to 75% of the lesser of the purchase price or appraised value; for owner occupied properties, we can go as high as 90% so long as the borrower meets certain financial ratios.

  • Amortization up to 25 years

  • Fixed or floating rate options available

Going rates based on the current Prime lending rate (7.2% as at today’s date) can typically range between Prime + 0.5% on floating up to Prime + 1.5%

Indicative fixed rates based on an amortization of 25-years as of today are as follows; note that rates are subject to change daily up to and including the date of drawdown on approved credit facilities and all pricing is subject to formal credit approval:

1 year 7.18%

3 year 7.03%

5 year 6.76%

Below is a list of items we typically need from a client to get started on a proposal and complete our due diligence:

  • Most recent 3 years financial statements

  • Personal Financial Statements on CWB forms to be provided from owners

  • Copy of purchase agreement

*Updated appraisal and Environmental due diligence on the property being purchased including but not limited to a Clean Phase 1 Environmental

  • **these are typically requested once a discussion paper has been presented to the client – they do not need to incur this expense until they agree to a term sheet/discussion paper

Hope that helps give some ballpark figures however please keep in mind every deal is adjudicated based on its own merit and so pricing is often reflective of the risk involved, the loan to values, and the total relationship.

For More information on CWB rates you will want to contact

Sarah Trottier, Sr relationship manager Commercial Banking

250-649-3101 or email


Royal Bank - RBC

I reached out to Norm Hebert from RBC and his response was as follows.

1. What is the going rate range now for business purchases? – 8.5% on average

2. Owner occupied buildings? – 7.5-8% depending on the company and leverage

3. Investment buildings? 7.5-8.0% again.

ON income producing properties, cashflow mortgageability (ie servicing debt at 7.5%+ rate with 1.2x Debt Service ratio) is turning lending values to 50% now.

Cap Rates are holding around 5.5%.

Softening of the market overall in terms of sales/resales

We are getting interest in business purchases where the bank lends on cashflow over a 5 year term. (based on 3 year EBITA average)

For more information on RBC rates or options please reach out to Norm

Norman Hebert | Senior Relationship Manager, Commercial Financial Services I 550 Victoria Street, 2nd Floor, Prince George, BC V2L2K1 | RBC Royal Bank | Royal Bank of Canada | T. (250) 960-4594 | M. (250) 552-1466 email norman.hebert@rbc.com

CIBC

I contacted Braden Cook CIBC and his response was as follows:

The rates and down payment portions would most often be situational. However variable our variable rate lending is Prime based, generally speaking Prime +1% (8.20% all in) is a baseline, we typically give or take 25bps depending on creditworthiness of the business entity. Most common down payments we structure are from 20 – 35%, but are also flexible and creative on what we can put together.

To be up front, investment properties are challenging to do with limited appetite from CIBC.

We are a relationship based bank and in the commercial space operate in a diversified business. Industrial, healthcare, professional, franchise, hospitality, agriculture, not-for-profits to name a few. Our franchise and healthcare (physician/dental) are competitive with the street with up to 100% financing.

In our space we do operational financing, equipment lending, real estate, construction financing, acquisition financing among others. Offer competitive rates on deposits and GICs as well.

We look for good people running good businesses, from there we are confident we can bring competitive and flexible solutions to the table.

Braden Cook, B.Comm | Manager | Commercial Banking | Northern BC | CIBC 1410 3rd Ave, Prince George, BC V2L 3G2 | Tel: 250 614-6444 ext. 453 | Cell: 250 552-1596 | braden.cook@cibc.com

Integris Credit Union - Natalie Maclaren

For commercial real estate, rates typically start at residential pricing + 0.50%. Our pricing is based on risk, so it’s tough to give a range for change of ownership financing. For operating lines, we are currently offering secured LOCs at P+1.00% and unsecured at P+2.00%.

Disclaimer: Lending products and mortgages offered by Integris are subject to lending criteria (conditions apply). Rates are based on risk. Rates may be higher depending on the application and type of property selected. Special Rates are discounted rates and are not the posted rates of Integris. Rates may be changed, withdrawn, or extended at any time, without notice.

A minimum of 25% is required down.

We are always happy to look at any deal, but we do like commercial real estate – owner occupied or income properties, general commercial operating, and construction financing.

Please feel free to give Natalie Maclaren a call at 250-612-3502 if you want to discuss.

nmaclaren@integriscu.ca

TD Bank

Kyle Mcdonald is the local Commercial go to guy.

Want to get ahold of Kyle and the TD Bank

Kyle McDonald | Account Manager | TD Commercial Banking

400 Victoria Street, 3rd Floor | Prince George, B.C. | V2L 2J7

C 250 981 4781

BDC

BDC is the Business Development Bank of Canada and specializes in business financing. I reached out to Brian Woodbeck who is the local manager. His response was as follows.


1. Business purchases(with no tangible security) are tough to answer as it widely varies depending on the strength of the business, and purchasers.

  1. Floating Rate: 8.80% to 13.50%; 5 yr fixed: 7.80% to 12.50%

  2. We have flexibility to lend up to 100% of the purchase price for an existing business owner looking to expand their business or diversify. For someone without an existing business, we are typically looking for 25% downpayment(which can be partially covered by vendor postponed debt)

2. Owner occupied

  1. Floating: 8.00% to 10.00%; 5 yr fixed: 7.00% to 9.00%

  2. 100% financing is an option


3. Investment properties (no residential properties, single unit or multi-unit)

  1. Floating: 8.50% to 10.50%; 5 yr fixed: 7.50% to 9.50%

  2. Maximum 85% loan to value, but due to increasing interest rates, we are typically looking at 75% LTV.


The above rates are estimates, and rates could vary higher or lower based on the strength of the transaction.

I think the key to BDC’s lending is if you can make a good business case, BDC can help build a financing solution for you. We are a flexible lender and look at each loan based on its own merits.

Cheers,

Brian Woodbeck Senior Account Manager | Directeur principal T 250-561-5336 C 250-649-6606 F 250-561-5512




Questions about commercial listings or another business or property you see for sale. Dave is happy to help. You can call him at 250-617-7467 or email at dave@businessrealtor.ca


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