Securing financing for commercial real estate ventures is a major step toward growth—whether you’re purchasing income-producing property, expanding operations, or refinancing existing debt. Commercial real estate loans in Canada have stricter requirements than residential mortgages, but with preparation and a clear strategy, approval is well within reach.
Here’s a practical, step-by-step guide to help improve your chances of approval—plus answers to the questions most borrowers ask.
Step-By-Step: Get Approved for Your Commercial Real Estate Loan
1. Understand What Lenders Are Looking For
Before you apply, it’s important to understand the common criteria lenders use when evaluating commercial real estate loan applications:
- Financial strength: Personal and business creditworthiness, cash flow, and liquidity.
- Debt Service Coverage Ratio (DSCR): A key ratio lenders use to assess whether the property’s income sufficiently covers loan payments.
- Loan-to-Value (LTV) Ratio: The proportion of the loan relative to the property’s appraised value—a lower LTV typically improves approval odds.
- Property fundamentals: Value, condition, location, and income-generating potential.
- Business plan and purpose: A clear description of how you’ll use the property and ensure ongoing revenue.
Understanding these core requirements will keep you focused on what matters most to lenders.
2. Prepare a Comprehensive Business Plan
Lenders want to see how the property fits into your bigger picture. A strong business plan should:
- Clearly explain your strategy for the property.
- Include realistic financial projections and cash flow estimates.
- Highlight expected rental income or operational revenue.
A detailed plan shows you’ve thought through the investment and strengthens the lender’s confidence in your ability to repay the loan.
3. Gather the Right Documents
Documentation is critical. Having everything organized ahead of time not only speeds up the process—it signals professionalism to lenders.
Key documents typically include:
- Business financial statements and tax returns (usually 2–3 years)
- Bank statements and proof of income
- Property details and purchase offer
- Appraisal report from a certified professional
- Lease or rent roll (if property is income-producing)
- Ownership or incorporation documents
4. Strengthen Your Credit and Financial Profile
Both personal and business credit scores matter. While minimum acceptable scores vary by lender, aiming for a score above 650–680 generally improves your chances and may lead to better loan terms.
Show consistent, on-time payments and reduced outstanding debts to demonstrate financial responsibility.
5. Save for a Down Payment and Lower Your LTV
Commercial lenders often require higher down payments than residential mortgages—typically between 20% and 35% (or more).
Putting more equity into the property can:
- Lower your overall risk profile
- Improve your Loan-to-Value (LTV) ratio
- Lead to better interest rates and terms
6. Understand Cash Flow and DSCR
Lenders look closely at the Debt Service Coverage Ratio (DSCR), which compares property income to loan payment obligations. A DSCR of 1.25 or higher is often considered healthy by many lenders, meaning the property generates at least 25% more income than needed to cover payments.
If your projected DSCR is tight, consider ways to increase revenue or reduce expenses before applying.
7. Choose the Right Lender and Loan Product
Different financial institutions have different appetites for risk. In Canada, you might consider:
- Traditional banks
- Credit unions
- Private or alternative lenders
- Commercial mortgage brokers (who can find competitive programs on your behalf)
- Crowdfunding
- Business lines of credit
- Joint ventures and partnerships
- Equity financing
Comparing options—including interest rates, terms, fees, and flexibility—can make a significant difference.
8. Be Prepared for Due Diligence
Commercial lenders undertake thorough due diligence. They may require additional documentation such as title searches, environmental assessments, and building inspections. Responding promptly and transparently during this process helps keep approvals on track.
9. Build Relationships with Lenders
A strong professional relationship can help you beyond the first loan. Regular communication with lenders and industry professionals positions you as a reliable borrower and may open doors to future opportunities.
Final Thoughts
While the process can be challenging, it is not impossible to secure financing for your commercial real estate ventures. By carefully evaluating your financial qualifications and adhering to regulatory guidelines, you can increase your chances of approval.
Once you’ve secured financing, the next step is to find the ideal commercial property. At CMS Real Estate, we specialize in helping clients find the right commercial property for sale in Calgary. Our team of experienced professionals will guide you through the process, from property search to closing the deal. Don’t let the complexities deter you—let us simplify the journey for you.
Contact CMS Real Estate today, and let’s find the perfect property to fuel your business growth and investment aspirations.
Frequently Asked Questions (FAQs)
What is the minimum credit score needed for a commercial real estate loan?
Most lenders prefer a score of 650–680 or higher, but requirements vary by institution and loan type.
How much down payment is typically required?
Expect 20%–35%+ of the property price. A higher down payment often improves approval odds and loan terms.
Will my personal finances be considered even if the loan is for a business?
Yes—lenders often review both personal and business financials to assess risk and repayment ability.
How long does the approval process usually take?
Commercial loan approvals can take several weeks, depending on documentation, property appraisal, and lender due diligence. Preparing in advance helps avoid delays.
Can I get alternative financing if banks decline my application?
Yes—private lenders, credit unions, and alternative financing channels can provide options, though terms may differ.