Insights · Buy
How to Finance Commercial Property in Ontario.
Financing a commercial property acquisition in Ontario is more complex than residential. This guide covers the key financing structures, lender expectations and terms a buyer should understand before making an offer.
Conventional Commercial Mortgages
LTV, DSCR,
and Term.
Most commercial acquisitions in Ontario are financed with conventional mortgages from Schedule A banks, credit unions or private lenders. Typical LTV for investment properties ranges from 65–75%. Lenders underwrite to DSCR (Debt Service Coverage Ratio) of at least 1.20x — meaning the property's net income must cover mortgage payments by a 20% margin.
Owner-user acquisitions are underwritten differently — lenders often look at the business cash flow in addition to the property income, and may accept higher LTVs for qualified operators with strong business financials.
CMHC and Alternative Programs
When Government
Financing Applies.
CMHC's MLI Select program applies primarily to multi-residential. For industrial, retail and office acquisitions, CMHC is not typically available. However, BDC (Business Development Bank of Canada) offers commercial real estate financing for owner-occupiers, often at competitive terms with longer amortisation periods.
Bridge financing — short-term loans used to close before conventional financing is arranged — is common in competitive offer situations where speed matters. Bridge rates are higher (8–12%+) but allow buyers to move decisively on off-market or time-sensitive opportunities.
What Lenders Care About
Covenant, Income,
and Exit Strategy.
For investment properties, lenders focus on tenant covenant (creditworthiness of the tenant), lease term remaining, and the in-place rent relative to market rent. A long-term lease to a creditworthy tenant at or below market rent is the most financeable position.
Lucero works with buyers throughout the acquisition process — including coordinating with lenders, reviewing financing conditions, and ensuring the purchase structure supports the buyer's financing objectives.