What security a lender asks for on a commercial loan

What security is for

Security gives the lender a recourse if the loan is not repaid. The stronger it is, the more risk the lender will accept.

It does not replace the income review. It comes on top of the reading of your application.

This guide describes the security you meet most often. None of it is automatic. Your commitment letter says what your lender asks for.

The property and other assets

BDC writes that a commercial real estate loan usually requires the property. In Quebec, this security takes the form of a hypothec on the property, registered in the land register.

The property also caps the amount lent. BDC explains that the loan-to-value ratio limits the loan based on market value. Commercial loans generally carry lower ratios than residential ones.

That means a larger down payment. BDC says a down payment of 20% or more is common.

• The hypothec on the property bought or refinanced
• Sometimes a hypothec on another property you own
• The loan-to-value ratio the lender sets after the appraisal

BDC states that a loan may also rely on other assets as security. The lender may ask for security over business property: equipment, inventory, accounts receivable.

For CMHC-insured financing, one law firm lists a trio of documents. They are the mortgage, the assignment of rents and a general security agreement.

That trio concerns insured loans. An uninsured loan may carry fewer documents or more.

The assignment of rents

In a rental building, the income comes from tenants. The lender may ask that those rents also serve as security.

On default, this assignment lets the lender collect the rents in your place. It protects the income that repays the loan.

The exact terms are in the deed of hypothec. Have your notary check what you assign, and what you keep as long as you pay.

The personal or corporate guarantee

BDC says a loan may require a personal or corporate guarantee. A guarantor undertakes to pay if the borrower does not.

A guarantee commits assets other than the property. A shareholder who guarantees a loan therefore puts personal assets at stake.

• A personal guarantee, given by an owner of the business
• A corporate guarantee, given by a related company
• A guarantee capped at a set amount, where the lender accepts it

Read the scope of the guarantee before signing. Ask whether it is limited in amount or duration, and whether it ends when certain conditions are met.

The case of CMHC-insured rental buildings

CMHC publishes requirements for some projects, such as modular rental construction. It asks that the borrower be able to guarantee 100% of the loan until the project has 12 consecutive months of stable rents.

It also asks for a net worth of at least 25% of the loan and at least five years of multi-unit management experience. These conditions describe one program. They do not apply to every loan.

CMHC also states that bonding must be in place before construction advances. Details vary by project.

Security comes with obligations. The contract may require you to insure the property, pay taxes and provide financial statements.

BDC notes that many commercial loans are call loans. The lender can then demand repayment at any time. Check whether yours is one.

The contract also imposes obligations. It may require you to insure the property, pay taxes and provide financial statements.

A default opens every agreed item of security to the lender. That is why the number of items matters as much as their type.

Ask also what happens to the security once the loan is repaid. A discharge is the deed that removes the hypothec from the land register. FCAC lists it among the costs of changing lenders.

One more item of security is not always a bad sign. It can allow a larger loan or a more generous loan-to-value ratio, depending on the lender.

It does have a price, sometimes in registration costs, sometimes in lost room to maneuver. Ask the question before you accept.

Think also about future borrowing. Security pledged to one lender may not be available to another. A second loan on the same property then becomes harder to arrange. Ask your lender whether it allows other lenders to take security behind it, and on what terms.

How to compare two offers

Set the security of each offer side by side. An offer with a lower rate may ask for more security.

• Which security is required over the property and over the business?
• Is there a guarantee, and what is its scope?
• Are the rents assigned, and on what terms?
• Does the security end if the loan is reduced or the project reaches a threshold?

Each item of security has a lifespan. Ask when it ends: at repayment, at an income threshold or on a set date.

Ask too whether one item can be replaced by another. CMHC, for example, mentions alternatives to bonding on some construction projects, depending on the project.

Do not sign in a hurry. Security is negotiated before the commitment letter, rarely after.

What to do next

Before signing, have a notary or lawyer explain each item of security. Ask what happens to each one at repayment or renewal.

PMECAP is a free comparison site and does not lend. The commercial financing and multi-unit guides present the usual requirements. The request then goes to a mortgage brokerage registered with the AMF.

FAQ

Sources

• BDC : prêt immobilier commercial (accessed October 13, 2026)
• BDC : prêt hypothécaire commercial (glossaire) (accessed October 13, 2026)
• SCHL : construction locative modulaire (exigences de l’emprunteur) (accessed October 13, 2026)
• Cabinet d’avocats (GRLLP) : dix choses à savoir sur le financement commercial assuré par la SCHL (accessed October 13, 2026)