Why banks aren’t lending money on many profitable projects.
The most common question from new investors is, “if the deal is so good why isn’t the bank lending money to the borrower?” The answer is simple. The federal government controls the banking system in Canada and restricts foreign banks from doing business here. This was done restrict competition for the current banks already doing business in Canada. As bank profits soar the banks have the luxury of choosing only the lowest risk commercial and small business loan projects, opting to focus on non-lending business models, such as service fees and investment service fees.
Loan decisions generally come from someone geographically well-removed who is looking for minimum financial ratios. They favor specific business segments and rely heavily on previous or outdated financial information. This process is often very lengthy and can often take weeks before the borrower receives a firm loan commitment or notification of rejection.
Private Capital Mortgage Ltd. can make decisions on a much more timely basis relying on the valuation of the real estate as it’s primary factor in providing a privately funded short term mortgage.