When most people think about commercial mortgages, they think about banks. TD, RBC, BMO—the usual suspects.
But here’s what a lot of business owners don’t realize: banks only represent maybe 50-60% of the commercial mortgage market in Canada. The rest is alternative lenders—a diverse ecosystem of non-bank institutions that often offer better solutions for deals that don’t fit the conventional mold.
Let me break down the alternative lending landscape in Canada so you understand all your options beyond traditional banks.
What Are Alternative Lenders?
Alternative lenders are non-bank financial institutions that make commercial real estate loans. They raise capital from investors (pension funds, high-net-worth individuals, institutional investors) and deploy it into mortgages.
They’re not taking deposits from the public like banks do, so they’re not subject to the same regulatory constraints. This gives them more flexibility on what deals they’ll approve and how they structure financing.
Alternative lenders include:
- Trust companies
- Mortgage investment corporations (MICs)
- Real estate investment trusts (REITs) focused on mortgage lending
- Private equity funds focused on real estate debt
- Insurance companies (for larger deals)
- Pension funds (for larger deals)
- Family offices
- Specialty finance companies
Each category operates differently and serves different parts of the market.
Why Alternative Lenders Exist
You might wonder: if banks dominate commercial lending, why do we need alternative lenders?
Because banks have limitations:
- They’re very conservative on property types (they like conventional office, retail, industrial, multifamily)
- They have strict credit requirements (usually 680+ credit score)
- They want borrowers with extensive experience and strong financials
- They’re slow (6-8 weeks for approvals)
- They have rigid products (fixed terms, limited flexibility)
Alternative lenders fill the gaps:
- They’ll consider unusual property types (car washes, marinas, specialized industrial, mixed-use)
- They work with borrowers who have credit challenges
- They approve borrowers without extensive track records
- They move faster (sometimes 2-3 weeks)
- They customize terms to fit your specific situation
The Alternative Lender Spectrum
Let me break down the different types of alternative lenders and where they fit.
Near-Prime Alternative Lenders
These lenders are closest to banks in terms of rates and underwriting. They focus on borrowers and properties that are almost bank-quality but have one or two issues.
Examples: Equitable Bank, MCAP (on their alternative side), some credit unions doing alternative programs
Rates: 6.5-8.5% Credit score: 620-680 Down payment: 25-30% Property types: Most conventional types
These lenders are perfect for borrowers who are just outside bank parameters—maybe your credit score is 660 instead of 680, or the property is in a secondary market rather than downtown Toronto.
B-Lenders and MICs
These are institutional alternative lenders with professional operations but more flexible underwriting than near-prime lenders.
Examples: Timbercreek, Romspen, Atrium, Firm Capital
Rates: 7.5-9.5% Credit score: 580-650 Down payment: 25-35% Property types: Wide range, including some non-conventional
B-lenders work well when you have meaningful credit challenges but still a solid overall story, or when your property is a bit specialized.
Private Lending Funds
These are professional private lending operations—not individual private lenders, but companies that raise money from investors and deploy it into higher-risk, higher-return mortgages.
Examples: CMI Canadian Mortgages, Ninepoint Partners, various regional private lending funds
Rates: 8.5-11% Credit score: Any, or none Down payment: 30-40%+ Property types: Very broad
These funds bridge the gap between institutional B-lenders and individual private lenders. More professional than mom-and-pop private lenders, but more expensive than B-lenders.
Individual Private Lenders
High-net-worth individuals lending their own money, typically through mortgage brokers.
Rates: 9-15% Credit score: Any Down payment: 30-50% Property types: Depends on the individual, but generally they want solid equity cushion
Most flexible but also most expensive and least consistent.
Specialized Alternative Lenders
Beyond the general-purpose alternative lenders, there are specialists who focus on specific niches.
Construction Lenders
Some alternative lenders specialize in construction financing—loans to build new properties or do major renovations.
Construction financing is complex and risky, so many banks avoid it or make it very difficult. Alternative construction lenders understand the process and have products designed specifically for it.
Examples: CMLS Financial, Trez Capital (construction focus)
Bridge Lenders
Bridge loans are short-term loans (6-18 months) used to “bridge” from one situation to another—maybe you’re buying a property that needs work before it qualifies for permanent financing, or you need to close quickly.
Some alternative lenders specialize in bridge financing—fast approvals (1-2 weeks), high leverage (up to 75-80% LTV), short terms, higher rates.
Agricultural Specialists
Beyond FCC and banks, there are alternative lenders who focus specifically on agricultural properties and businesses.
These lenders understand farming, seasonal cash flows, and agricultural property valuations better than generalist lenders.
Hospitality Specialists
Hotels, motels, resorts—these are specialized properties that many lenders avoid. Some alternative lenders focus specifically on hospitality and understand the unique cash flow patterns and valuation methods.
Industrial and Warehouse Specialists
With the explosion of e-commerce and logistics, some alternative lenders have developed expertise in warehouses, distribution centers, and logistics properties.
Life Insurance Companies and Pension Funds
For larger commercial deals ($5 million+), life insurance companies and pension funds are major lenders.
These institutions have billions to deploy and they’re looking for stable, long-term returns on high-quality commercial real estate.
Life Insurance Company Lending
Examples: Manulife, Sun Life, Canada Life, Industrial Alliance
Focus: Large commercial properties ($5M+), class A assets, strong markets, experienced borrowers Rates: Very competitive, often match or beat banks (5.5-6.5%) Terms: Long terms available (10-15 years), long amortizations (25-30 years)
Insurance companies are conservative but they have huge capital capacity and they’re looking for long-term holds. If you’re buying a $10 million class A office building and you plan to hold it for 20 years, insurance company financing is often ideal.
Pension Fund Lending
Large Canadian pension funds (CPPIB, Ontario Teachers’, OMERS, etc.) either lend directly or invest in mortgage funds that lend.
Focus: Very large deals ($20M+), institutional-quality properties, major markets
For most small and mid-sized investors, pension funds are inaccessible. But for large developers and institutional investors, they’re a major capital source.
Credit Unions as Alternative Lenders
Credit unions occupy an interesting space. They’re not technically alternative lenders—they’re depository institutions like banks.
But they often act like alternative lenders because they have more flexibility than banks on relationship lending and local decision-making.
Some credit unions have formal alternative lending programs with higher rates and more flexible underwriting. Others just have relationship-driven lending teams willing to approve deals that don’t fit standard boxes.
Rates are typically bank-like (6-7.5%) rather than alternative lender rates (8-10%), but approval criteria are somewhere between banks and alternative lenders.
How to Choose Among Alternative Lenders
With so many options, how do you decide which alternative lender makes sense?
Start with Rate and Terms
Obviously you want the lowest rate possible. But compare apples to apples:
- What’s the interest rate?
- What are the lender fees?
- What’s the term and amortization?
- Are there prepayment penalties?
- What’s the total cost over the expected hold period?
A lender at 8.5% with no fees might be cheaper than 8.0% with 2% lender fees, depending on how long you hold the mortgage.
Consider Approval Likelihood
There’s no point applying to a lender at 7% if they’re going to decline you. Better to go to a lender at 8.5% who will actually approve your deal.
This is where broker expertise matters—we know which lenders will likely approve which types of deals.
Evaluate Timeline
Do you need to close in two weeks? Then you need a lender who moves fast, even if they cost more.
If you have 8 weeks to close, you can pursue lenders with lower rates but slower timelines.
Look at Flexibility
Some lenders have rigid products—fixed rates, fixed terms, standard underwriting.
Others will customize—adjusting amortizations, creating graduated payment structures, waiving certain requirements.
If your deal needs flexibility, that matters more than saving 0.25% on rate.
Assess Lender Reputation
Is the lender known for closing deals reliably? Or do they issue commitments and then back out?
Is their renewal policy reasonable, or do they jack up rates dramatically at renewal?
Do they work constructively with borrowers who hit challenges, or do they immediately threaten foreclosure?
Reputation matters, especially for longer-term financing.
Real-World Scenarios
Let me walk through some examples of matching borrowers with alternative lenders.
Scenario 1: Small Mixed-Use Building
Property: $1.2 million mixed-use building (retail main floor, apartments above) in a small Ontario town Borrower: Good credit (680), 25% down, solid income Challenge: Property too small and too mixed-use for banks to care about
Best fit: Local credit union or near-prime alternative lender (Equitable Bank) Expected rate: 7.0-7.5% Why: Property and borrower are solid, just outside bank sweet spot
Scenario 2: Larger Apartment Building
Property: $8 million apartment building in Edmonton, 95% occupied, good condition Borrower: Experienced investor with 720 credit score, 30% down Challenge: None really, this is a strong deal
Best fit: Bank or insurance company (Manulife, Sun Life) Expected rate: 5.5-6.5% Why: This is prime bank financing territory—no reason to use alternative lenders
Scenario 3: Value-Add Industrial Property
Property: $3 million industrial building, currently 60% leased, needs some repairs Borrower: Experienced investor with 650 credit, 30% down, solid business plan for improvements Challenge: Property condition and vacancy make banks nervous, borrower credit is below bank threshold
Best fit: B-lender (Timbercreek, Atrium) Expected rate: 8.0-8.5% Why: B-lender will look at the value-add plan and the overall story, not just current condition
Scenario 4: Quick-Close Opportunity
Property: $2.5 million retail plaza, motivated seller, need to close in 3 weeks Borrower: Good borrower, conventional property Challenge: Timeline—banks take 6-8 weeks
Best fit: Private lending fund for bridge financing, then refinance to bank Expected rate: 9.5% for 6 months, then 6.5% after refinancing Why: Worth paying private money rates for a few months to capture a great deal
Scenario 5: Unique Property Type
Property: $4 million car wash (modern touchless facility), good cash flow Borrower: Excellent credit, 30% down, extensive car wash experience Challenge: Banks don’t understand or like car washes
Best fit: Alternative lender with hospitality/specialty property focus Expected rate: 7.5-8.5% Why: Need a lender comfortable with specialized property types
The Application Process with Alternative Lenders
How do you actually apply to alternative lenders?
Through a Mortgage Broker (Recommended)
Most alternative lenders only work through licensed mortgage brokers. You can’t apply directly.
Benefits:
- We have access to dozens of alternative lenders
- We know which lender to present your deal to
- We handle all the paperwork and coordination
- We often get better rates through volume relationships
- No cost to you (lenders pay us)
Directly to the Lender
Some alternative lenders accept direct applications (Equitable Bank, some MICs).
Benefits:
- One less party involved
- Direct relationship with the lender
Drawbacks:
- You’re limited to one lender’s offerings
- You don’t know if you could get better terms elsewhere
- You handle all the paperwork yourself
- The lender isn’t necessarily giving you their best rate (we often negotiate better terms)
Documentation Required
Alternative lenders typically want:
- Last 2-3 years of personal and corporate tax returns
- Personal net worth statement
- Business financial statements
- Property details (rent rolls, operating statements, appraisal)
- Environmental site assessment
- Property condition assessment (for larger deals)
Similar to bank requirements, but alternative lenders are often more flexible about using alternative forms of income verification.
Costs Beyond Interest Rate
When evaluating alternative lenders, look at the total cost picture:
Lender Fees Typically 1-2% of loan amount, paid upfront
Broker Fees Usually paid by the lender, not by you—but confirm this
Legal Fees You pay for both your lawyer and the lender’s lawyer (typically $2,000-$5,000 total)
Appraisal $2,000-$5,000 depending on property size and complexity
Environmental Assessment $2,000-$5,000 for Phase I
Property Condition Assessment $1,500-$3,000 for larger properties
Prepayment Penalties Check the terms carefully—some alternative lenders have steep penalties for early payout
Factor all these costs into your analysis, not just the interest rate.
The Future of Alternative Lending in Canada
Alternative lending in Canadian commercial real estate has been growing steadily for the past decade, and I expect that trend to continue.
Banks have been getting more conservative—tighter lending standards, more regulatory constraints, less appetite for smaller deals or non-conventional properties.
Alternative lenders are filling the gap with more capital, better technology, and more sophisticated operations.
We’re also seeing more specialization—lenders focusing on specific property types, specific regions, or specific deal structures rather than being generalists.
The result is more options for borrowers, which is good for the market.
The Bottom Line
Alternative lenders are a crucial part of the Canadian commercial mortgage ecosystem. They provide financing for deals that banks won’t touch, and they often provide better solutions even for deals that banks would approve.
Understanding the landscape—from near-prime lenders barely different from banks, to B-lenders and MICs in the middle, to private lending funds and individual private lenders at the higher-cost end—helps you make informed financing decisions.
The right alternative lender depends on your credit, your property, your timeline, and your priorities. There’s no one-size-fits-all answer.
Working with an experienced mortgage broker who knows the alternative lending market can save you thousands of dollars and weeks of time by connecting you with the right lender for your specific situation.
If you’re exploring commercial real estate financing and want to understand all your options beyond traditional banks, contact Creek Road Financial Inc. for a free consultation. We work with over 50 lenders including banks, credit unions, and the full spectrum of alternative lenders across Canada.