Commercial mortgage requirements in BC
The five tests a British Columbia lender runs before a commercial file becomes an approval.
The short answer
A conventional file needs debt service coverage of 1.20 to 1.25, a down payment of 25 to 35 percent, net worth at least equal to the loan with liquidity around 10 percent of it, third party reports, and personal guarantees from the principals.
| Test | What lenders want | Why |
|---|---|---|
| Debt service coverage | 1.20 to 1.25 on conventional deals | That ratio, not the purchase price, usually sets the loan amount |
| Down payment | 25 to 35 percent | Driven by asset type, tenant quality and the strength of the covenant |
| Net worth and liquidity | Net worth at least equal to the loan, liquidity roughly 10 percent after closing | On construction files the sponsor's experience is often the deciding factor |
| Third party reports | Appraisal, environmental Phase 1, sometimes a building condition assessment | Report turnaround is the most common cause of a missed closing date in British Columbia |
| Recourse | Full recourse with personal guarantees | That clause outlives the interest rate, so ask what the guarantee covers |
Debt service coverage (1.20 to 1.25)
Commercial lending starts with the building's income, not your salary. Lenders generally want a debt service coverage ratio of 1.20 to 1.25 on conventional deals, so net operating income exceeds the annual mortgage payments by a comfortable margin. That ratio, not the purchase price, usually sets the loan amount. Our DSCR guide walks the math, and the commercial mortgage calculator sizes it for your numbers.
Down payment (25 to 35 percent)
Expect to put down 25 to 35 percent on a conventional commercial purchase, with the exact figure driven by asset type, tenant quality and the strength of the covenant. Stabilised multifamily sits at the friendly end. Special purpose buildings and thin markets sit at the other. Insured multifamily programs can go materially higher on leverage, which changes the equity picture entirely.
Net worth and experience
A common rule of thumb is net worth at least equal to the loan amount, with liquidity of roughly 10 percent of the loan available after closing. Lenders also read your history: what you own, what you have built, and how comparable projects finished. On construction files the sponsor's experience is often the deciding factor, not the pro forma.
Third party reports
Every commercial approval is conditional on reports the lender can rely on. An appraisal confirms value and market rents. An environmental Phase 1 checks site history and is standard on industrial and older commercial sites. A building condition assessment or cost consultant report may be added for larger or construction files. Order them early: report turnaround is the most common cause of a missed closing date in British Columbia. If the appraisal lands under the price, read what happens when the appraisal comes in low.
Recourse and guarantees
Most conventional commercial mortgages are full recourse, with personal guarantees from the principals behind the borrowing company. Limited recourse and non recourse structures exist, generally on strong insured multifamily files, and they are earned through leverage, asset quality and sponsor strength. Ask what the guarantee actually covers before you sign, because that clause outlives the interest rate. Borrowers who live outside Canada face a further set of conditions, covered on our non resident borrower page. Requirements also tighten by asset class: office buildings carry the widest coverage cushion of the conventional classes, and an owner occupied purchase adds your business financial statements to the list. Two more pieces sit behind the requirements above: the lender sizes against its own appraisal rather than your price, and where the equity is short a vendor take back only works if the first lender consents to it.
Requirement questions we hear most.
Broader questions about commercial financing are answered on our commercial mortgage FAQ.
See where your deal stands.
Send us the property and the numbers. We will tell you which requirements your file already clears and which need work.