Quick answer: It depends on the property type and its income. For a business buying its own premises, BDC says it can finance up to 100% of the project cost for eligible businesses. Investment retail, office and industrial buildings usually need a much larger down payment. Multi unit rentals with five or more units can qualify for CMHC insurance up to 85% loan to value. Land and construction need the most cash. Lenders also cap the loan by the property's income.
Clients often expect a single number like the 5% or 20% they know from buying a home. Commercial lending does not work that way. Here is how I explain it.
How do lenders decide how much to lend?
A commercial lender runs two tests and gives you the lower result:
- Loan to value. The loan as a share of the appraised value or the purchase price, whichever is lower.
- Debt coverage ratio. The property's net operating income (rent minus operating costs) divided by the yearly mortgage payments. Lenders want this comfortably above 1.0.
Your down payment is the price minus the smaller loan. For an owner occupied building, the lender also reviews your business's cash flow.
How much down payment does each property type need?
| Property type | What lenders typically do |
|---|---|
| Owner occupied business property | BDC says it can finance up to 100% of the project cost for eligible businesses, and that banks typically finance 75% to 100% of value depending on condition and age. |
| Investment retail, office or industrial | A larger down payment, and the loan is often limited by debt coverage. |
| Mixed use (residential over retail) | Usually treated as commercial. CMHC insurance needs at least 70% residential by floor area and loan value. |
| Multi unit residential, 5 or more units | TD's multi unit page says it finances up to 75% of appraised value on a purchase, and up to 85% with CMHC insurance. |
| Land and construction | The smallest share of value, with construction funds advanced in stages. |
What about owner occupied business property?
You have the most options here. BDC's loan offers amortization up to 25 years for registered, active Canadian businesses, typically with at least 24 months of operating history, and excludes projects zoned for residential use. Banks and credit unions also lend, based on your business's profits. See my commercial mortgage in BC page.
What about multi unit rentals?
For buildings with five or more rental units, CMHC's standard rental insurance allows a maximum loan to value of 85% and amortization up to 40 years on existing properties. CMHC's MLI Select program can go further for projects that meet affordability, energy or accessibility targets. I explain it in a separate guide to MLI Select in BC.
What about land and construction?
Raw land earns no income, so lenders lend less against it. Construction funds arrive as work is inspected, so you need cash for land, permits and early work. See vacant land mortgages and construction financing.
How can debt coverage shrink your loan?
- Purchase price and appraised value: $2,000,000
- Net operating income: $110,000 a year
- Lender limits in this example: 75% loan to value and a minimum debt coverage ratio of 1.25
- Illustrative rate: 6.00% interest, 6.00% APR assuming no lender fees, 5 year term, 25 year amortization, monthly payments
Loan to value test: 75% of $2,000,000 is $1,500,000. Payments on $1,500,000 at the illustrative rate are about $115,974 a year, which gives a debt coverage ratio of $110,000 divided by $115,974, or about 0.95. That fails.
Debt coverage test: $110,000 divided by 1.25 is $88,000 a year, or about $7,333 a month, for mortgage payments. At the illustrative rate, that payment supports a loan of about $1,138,000.
Result: the lender offers about $1,138,000, not $1,500,000, so your down payment is about $862,000, or 43% of the price, before closing costs. That is why I ask for rent rolls before quoting a down payment.
Where can the down payment come from?
- Cash from savings or your business.
- Equity in other property through a refinance or line of credit. The lender will count that new debt.
- Vendor take back. The seller lends part of the price as a second mortgage, if the first lender allows it.
- Partners. Lenders often ask each partner for a personal guarantee.
What closing costs go on top of the down payment?
- BC property transfer tax. It applies to commercial property too: 1% on the first $200,000, 2% on the portion up to $2 million and 3% above that. On the $2,000,000 example, that is $2,000 plus $36,000, or $38,000. The further 2% on value above $3 million applies only to the residential portion.
- GST. The CRA says a sale of commercial real property is generally taxable whether new or used, and a GST registered buyer usually accounts for the tax itself. Ask your accountant before you waive conditions.
- Appraisal and reports. Lenders such as RBC ask for a current appraisal by an AACI qualified appraiser and a Phase I environmental report, and may ask for a building condition report.
- Legal fees and lender or broker fees, disclosed in writing before you sign.
For how rates and fees compare, see my guide to commercial mortgage rates in BC, or read about how I work as a commercial mortgage broker.
What are the key takeaways?
- There is no single commercial down payment. Property type, income and lender all change it.
- Lenders take the lower of the loan to value limit and the debt coverage limit.
- Owner occupied property has the most financing options, including BDC.
- Rentals with five or more units can reach 85% loan to value with CMHC insurance.
- Add property transfer tax, possible GST, appraisal, environmental and legal costs to your cash plan.
Send me the listing and rent roll, and I will show you how much cash you really need. Book an appointment to get started.
What other questions do readers ask?
What is the minimum down payment for a commercial property in Canada?
There is no single minimum. It depends on the property type, its income and the lender. BDC says it can finance up to 100% of the project cost for eligible businesses buying their own premises, while investment properties usually need a much larger down payment, and the loan is often limited by the property's income.
Can I use the equity in my house for a commercial down payment?
Often, yes. Many buyers refinance a home or another property, or add a line of credit, and use that money toward the down payment. The lender on the commercial property will look at the new debt when it reviews your file.
Does property transfer tax apply to commercial property in BC?
Yes. The general property transfer tax applies to taxable transactions, including commercial property: 1% on the first $200,000 of fair market value, 2% on the portion up to $2 million and 3% above $2 million. The further 2% on value above $3 million applies only to the residential portion.
Is GST charged on a commercial property purchase?
Generally yes. The CRA says a sale of commercial real property is generally taxable whether it is new or used, and a GST registered buyer usually accounts for the tax itself. Ask your accountant before you sign, because the rules affect how much cash you need.
Why did the lender offer less than its maximum loan to value?
Usually because of the debt coverage ratio. If the property's net operating income cannot cover the mortgage payments with enough room to spare, the lender lowers the loan until it can, and you bring a larger down payment.
Where do these numbers come from?
- BDC: Commercial real estate loan (up to 100% of project cost, amortization up to 25 years)
- BDC: Get the right level of financing for your real estate project
- CMHC: Mortgage loan insurance for standard rental housing
- Government of BC: Property transfer tax
- CRA: Commercial real property, sales and rentals (GST/HST Memorandum 19.4.1)
Published November 10, 2026. This article is general information, not personal financial advice. Rates and programs change, and every approval depends on your full application. Asim Ali is a licensed mortgage broker with Dominion Lending Centres A.I.M.I. Collective Mortgage Group.