How real estate works as collateral
When property secures a business loan, the lender registers a mortgage (charge) on title. If the loan isn't repaid, the lender can enforce against the property. That security lowers lender risk, which is why property-secured business financing can offer larger amounts and longer amortizations than unsecured credit.
| Concept | What it means | Why it matters |
|---|---|---|
| Loan-to-value (LTV) | Loan ÷ appraised value | Lenders cap LTV by property type and lender |
| First vs. second charge | Priority on title if the property is sold | Second charges cost more and allow less LTV |
| Appraisal | Independent valuation ordered for the lender | Sets the value LTV is measured against |
| Environmental review | Phase I report, common for commercial property | Contamination risk can limit lending |
| Collateral vs. owner-occupied | Property pledged vs. property the business uses | Lenders price and size these differently |
| Personal guarantee / ILA | Owner guarantees; independent legal advice | Required when personal property secures business debt |
Where a broker fits
A broker sits between you and the lending market. I assess your needs, package your file, approach suitable lenders and help you compare offers. I don't approve, fund or guarantee any loan. The lender you choose does that, under its own rules.
The six steps to a real estate-secured business loan
- Define the purpose and amount. Lenders fund purposes, not wishes. "Buy a $180,000 excavator" is clearer than "need $200K."
- Identify the property and gather documents. Property details, existing mortgage statements, tax bill, plus business financial statements, tax filings, debt schedule and guarantor information.
- Check loan-to-value and debt service coverage. Is there enough equity, and will cash flow cover existing and new payments? See the calculator below.
- Match to lender types. Based on credit, time in business, collateral and urgency.
- Submit and compare offers. Look beyond rate: fees, term, amortization, security, covenants and prepayment.
- Appraisal, legal and close. The lender orders an appraisal (and often an environmental report), lawyers register the mortgage, and the lender funds.
The five Cs of credit
| C | What the lender asks | Evidence |
|---|---|---|
| Character | Do the owners repay obligations? | Credit history, experience, references |
| Capacity | Can cash flow service the debt? | Financial statements, DSCR |
| Capital | How much have owners invested? | Balance sheet equity, down payment |
| Collateral | What secures the loan? | Equipment, receivables, real property, guarantees |
| Conditions | What's the purpose and economic context? | Industry, use of funds, market |
Lender types compared
| Lender type | Typical strengths | Typical trade-offs |
|---|---|---|
| Major banks | Lower cost, full product range | Strict criteria, slower for complex files |
| Credit unions | Local flexibility, relationship lending | Size limits, regional focus |
| BDC | Federal development lender, longer amortizations on some products | Own eligibility and pricing |
| CSBFP participating lenders | Government risk-sharing for eligible small business assets | Program limits and eligible-use rules |
| Alternative / private lenders | Speed, credit flexibility | Higher cost, shorter terms |
| Revenue-based / MCA providers | Very fast, sales-linked repayment | Often the highest cost |
Government-backed programs
Canada Small Business Financing Program (CSBFP)
Administered by Innovation, Science and Economic Development Canada, CSBFP lets participating banks and credit unions make eligible small business loans with the federal government sharing part of the loss risk. Eligible uses include equipment, leasehold improvements, real property and, within program limits, intangible assets and working capital. Program limits change from time to time; current details are published by ISED.
BDC
The Business Development Bank of Canada is a federal Crown corporation that lends directly to Canadian entrepreneurs, often complementing bank financing. BDC makes its own credit decisions.
Other financing (secondary)
Equipment financing, business lines of credit and unsecured working capital can be arranged on their own or alongside a property-secured facility.
Typical timelines
- Equipment / alternative lenders: often days for straightforward files.
- Bank, credit union and CSBFP term loans: commonly a few weeks.
- Real estate-related: often several weeks or longer.
These are general ranges, not commitments; every lender and file differs.
Broker, not lender. Meshesha Robel does not fund loans. Every loan is offered, approved and funded by a third-party lender under its own underwriting. Approval and terms are never guaranteed.