The Top 3 Mistakes Residential Brokers Make on Their First Commercial File (And How to Avoid Them)
You’re at the top of your game. You can structure a residential file in your sleep, and you’ve built a loyal client base that trusts you implicitly. One day, one of your best clients—a successful business owner—comes to you with an exciting opportunity: they want to buy the building their company operates from.
It’s a fantastic opportunity. It's also terrifying.
The fear of fumbling the ball for a great client, of looking inexperienced, or of wasting weeks on a deal only to have it fall apart is real. I’ve seen it dozens of times. The good news is that the most common mistakes are entirely avoidable.
Let's pull back the curtain on the three biggest mistakes that even the best residential brokers make, and give you the blueprint to get it right from the start.
Mistake #1: Submitting a Residential-Style Application
In the residential world, you are masters of a streamlined, system-driven process. You gather the docs, fill out the application in Filogix or a lender portal, and the system tells you what’s next.
A commercial application is the complete opposite. It is not a form to be filled out; it is a business plan to be written. Submitting a simple application with a few pay stubs and a credit score will get you a swift rejection, or worse, no response at all. It signals to the lender that you don’t know what you’re doing.
How to Avoid It: Think "Storyteller," Not "Form-Filler." You must manually build a comprehensive submission package that tells the story of the deal. Before you even think about which lender to approach, gather this bare minimum:
A Professional Executive Summary: A 1-2 page cover letter explaining the deal, the borrower's background, and why this is a good risk for the lender. This is your chance to sell the story.
A Personal Net Worth Statement: For all personal guarantors.
Company Financial Statements: Typically 2-3 years for an existing business (balance sheet, income statement).
Personal Tax Returns: 2 years of full T1 Generals and the corresponding Notices of Assessment.
The Property Details: The accepted Purchase Agreement and the MLS listing (if applicable).
A Current Rent Roll: If the property has existing tenants.
Mistake #2: Focusing Entirely on the Borrower, Not the Property
Your residential instincts scream at you to focus on the borrower's personal income and creditworthiness. You’re trained to prove that the person can afford the debt.
In commercial lending, that’s only half the story, and it's the less important half. The single most critical question is: can the property pay for itself? A borrower can have a seven-figure income, but if the building they're buying has a negative cash flow (a DSCR below 1.0x), no 'A' lender will touch the deal. The lender’s primary security is not the borrower's T4; it’s the asset’s ability to generate income.
How to Avoid It: Adopt the "Property First" Mantra. Before you spend hours analyzing a client's personal finances, you must first underwrite the property itself. Ask yourself:
What is the property's Net Operating Income (NOI)?
What will the new annual mortgage payment (Debt Service) be?
Does the property cash flow with a healthy cushion? (i.e., is the DSCR 1.25x or higher?)
If the answer to that last question is "no," you don't have a viable deal for a conventional lender, no matter how strong the borrower is. The property must qualify first.
Mistake #3: Taking the Deal to Just One Lender (Their Residential BDM)
When you have a residential file, you likely have a go-to list of lenders and a trusted Business Development Manager (BDM) you call for everything. It's natural to take your first commercial deal to that same familiar face. This is often a fatal error.
The world of commercial lending is highly specialized. Your friendly residential BDM at a Big 5 bank likely has nothing to do with their commercial real estate division. Even if they pass it along, their bank may have zero appetite for the specific deal you’re presenting. A bank that loves financing multi-family buildings in Edmonton might refuse to look at owner-occupied industrial bays in Nisku.
How to Avoid It: Become a Matchmaker. Your job isn't just to submit the file; it's to be a matchmaker between a specific deal and a lender with an appetite for it. You need to understand the landscape:
Big 5 Banks: Best for larger, lower-risk, "A" quality deals.
Alberta Credit Unions (like ATB or Servus): Often have more flexibility, local decision-makers, and a strong appetite for small-to-mid-sized local businesses.
Alternative Lenders & MICs: The place for "story" deals, unique properties, or borrowers who don't fit the traditional box.
Knowing where to take your deal is just as important as having a good deal in the first place.
You Have the Skill, You Just Need the Map
These mistakes aren't a reflection of your ability as a broker; they simply highlight the knowledge gap between two very different disciplines.
Avoiding these pitfalls is the first step. Building a systematic process to ensure you get it right every single time is what builds a career.
Ready to build your system?
If you're ready to move beyond just avoiding mistakes and start proactively building a thriving commercial finance business, the Commercial Accelerator Program is your next step. In our 6-week group program, we build your entire process together, from structuring the deal to presenting a winning proposal.