Commercial mortgages — the deal has to make sense before the rate matters
Plazas, mixed-use, multi-unit, industrial, land, construction and owner-occupied premises across the GTA. Residential lending is about you. Commercial lending is about the deal — and that changes almost everything about how a file gets built.
Four things every commercial lender asks
What does it earn? Net operating income — rent less real operating costs, not the optimistic version. On a development deal, what it will earn once stabilised.
Does the income cover the debt, with margin? Debt service coverage is the ratio that decides most commercial files. A property that barely covers its payment is a property the lender expects to be in trouble.
Have you done this before? Experience is genuinely underwritten in commercial lending in a way it never is residentially. A first project is financeable — it is financed differently.
How does the lender get repaid if the plan slips? Sale, refinance, stabilised income, a takeout lender. An exit that depends on everything going right is not an exit.
The part that catches people who have only done residential. Commercial deals are quoted, then underwritten, then conditioned — and the conditions are where the timeline actually lives. Environmental reports, appraisals with income approaches, rent roll verification, lease reviews, corporate financials, personal guarantees.
A residential file closes in weeks. A commercial file closes in months, and the ones that fail usually fail on conditions rather than on the initial approval. Plan the calendar around that from day one.
Down payment and structure
- Commercial requires more equity than residential — commonly 25% or more, and higher for land, construction and special-purpose property
- Terms are shorter than residential and amortisations vary widely by property type
- Personal guarantees are normal, and worth understanding fully before signing
- Fees behave differently — on a short-term or construction facility, fees can matter more than the rate. Compare total dollars, not rates.
Every one of these varies by lender, property type and the specific deal. Nothing here is a quote — it is what to expect walking in.
The deal types, and where each one gets stuck
The honest version: not what’s easy to finance, but what makes each type hard.
Multi-unit residential (5+ units)
Apartment buildings and multi-residential blocks, financed on the building’s income rather than on your personal income.
Where it gets stuckThe rent roll. Below-market rents, month-to-month tenancies and unverifiable income all reduce what the property will support — often well below what the purchase price assumes.
Apartment & condominium construction
Ground-up residential construction, funded in draws against verified progress rather than as a lump sum.
Where it gets stuckPre-sales, cost certainty and the takeout. Lenders want to see who buys the finished building and what happens if the schedule slips a season.
Builder & development finance
Financing for builders through acquisition, servicing and construction, usually across several facilities rather than one.
Where it gets stuckTrack record and the gap between approvals and shovels. Carrying costs through a longer-than-expected approval process is what breaks more builder files than construction cost.
Land development
Financing raw or partially serviced land through the entitlement process.
Where it gets stuckLand produces no income, so there is nothing to service the debt from. It is the most equity-hungry thing in commercial lending and it is almost always private or specialist money.
Industrial & warehouse development
Industrial complexes, warehousing and logistics property, built or acquired.
Where it gets stuckEnvironmental. A phase one that recommends a phase two can add months, and prior site use is not always obvious from the listing.
Commercial renovation & value-add
Financing improvements that raise a property’s income — repositioning, unit conversions, major building systems.
Where it gets stuckThe lender is asked to lend against income that does not exist yet. Whether that works turns entirely on how credible the post-renovation numbers are.
Recreational & special-purpose property
Resorts, marinas, campgrounds, banquet halls and similar — property whose value is tied to a specific operating business.
Where it gets stuckMarketability. A lender asks who else would buy this if it came back to them, and for special-purpose property the honest answer is a short list. That means more equity and fewer lenders.
Business capital financing
Raising capital for a business, often secured against commercial or residential real estate the owner already holds.
Where it gets stuckThe two sides get assessed separately. Strong real estate does not rescue weak business financials, and a strong business does not make an unfinanceable property financeable.
Business line of credit
Revolving credit for working capital and cash-flow timing, drawn as needed rather than advanced in full.
Where it gets stuckA line used permanently at its limit is read as term debt with extra steps. Lenders look at whether it actually revolves.
Small business loans
Financing for acquisition, expansion or premises — including government-backed programmes where the business qualifies.
Where it gets stuckThe same problem self-employed borrowers meet residentially: tax-efficient financials understate the business. The same principle applies here.
Equipment financing
Financing or leasing vehicles, machinery and plant, secured against the equipment itself.
Where it gets stuckNothing dramatic — but it shows up in your ratios. Equipment payments taken on before a property purchase can quietly reduce what you qualify for on the building.
The questions I actually get asked
What counts as a commercial mortgage?
How much down payment do I need?
How do lenders decide?
Can I get commercial financing with no experience?
How long does a commercial deal take?
Will I have to sign a personal guarantee?
Can I refinance a commercial property to pull equity out?
Are private lenders available for commercial?
What documents will I need?
Will you tell me if the deal doesn’t work?
Related
Have a deal on the table?
Send the property, the numbers and what you are trying to do. I will tell you honestly whether it is financeable and how.
Financing a commercial property or project?
Before you act, talk to Rajiv first. Let’s find out whether the deal works before you spend money proving it doesn’t.
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