But across Canada in 2026, banks are quietly stepping away from small commercial real estate financing — and property owners are feeling it.
If you own a retail plaza, mixed-use building, small apartment block, office condo, or light industrial property, this shift likely affects you — even if your property is performing.
What Counts as “Small Commercial”?
In today’s lending environment, small commercial typically means:
Loan sizes under $10 million
Owner-managed or family-owned properties
Mixed-use buildings (residential + commercial)
Retail plazas with local tenants
Small multifamily (6–40 units)
Office or industrial condos
These deals used to be bread-and-butter for banks.
Now? They’re becoming low priority.
Why Banks Are Pulling Back (Quietly)
Banks aren’t exiting because properties are bad.
They’re exiting because the math changed.
1️⃣ Higher Capital & Compliance Costs
Small commercial loans require the same regulatory oversight as larger deals — but generate far less return for banks.
2️⃣ Conservative Appraisals
Banks are heavily discounting:
Mixed-use income
Short-term or mom-and-pop tenants
Non-institutional leases
Even strong cash-flowing buildings are being under-valued.
3️⃣ Refinance Risk
Banks don’t like:
Renewal risk
Short remaining lease terms
Properties that don’t “fit the box”
So instead of restructuring deals, they’re declining them.
4️⃣ Relationship Lending Is Gone
Algorithms replaced discretion.
If your deal doesn’t fit policy, it doesn’t get escalated.
The Result: Performing Properties, Declined Loans
This is the most frustrating part for owners.
Across Ontario, we’re seeing:
Renewals denied on performing assets
Loan amounts cut unexpectedly
HELOCs and credit facilities frozen
Refinance timelines stretched until deals collapse
Many owners are being forced to consider selling — not because they want to, but because financing disappeared.
Who’s Filling the Gap? Private Commercial Lenders
As banks retreat, private commercial lenders are stepping in — not recklessly, but strategically.
Private lenders focus on:
Equity
Asset quality
Location
Exit strategy
Not rigid institutional policy.
This makes private capital especially well-suited for small and mid-market commercial real estate.
When Private Commercial Lending Makes Sense
Private commercial financing is commonly used for:
🏢 Commercial Refinances
Renewal declined
Loan amount reduced
Appraisal shortfall
Private lenders bridge the gap — often short-term — until stability or repositioning is complete.
🌉 Bridge Loans
Ideal when:
A sale is pending
Tenants are being replaced
Capital improvements are underway
Speed and certainty matter more than rate.
🧱 Second Mortgages
Used to:
Inject working capital
Fund improvements
Stabilize cash flow
Without disturbing the first mortgage.
🏗 Mixed-Use & Transitional Assets
Banks struggle with mixed-use risk.
Private lenders understand it.
The Trade-Off: Flexibility vs Rate
Private commercial loans typically carry:
Higher interest rates
Shorter terms
But they offer:
Faster approvals
Flexible structures
Certainty of funding
Custom solutions
For many owners, certainty beats the lowest rate — especially when deadlines are real.
The Biggest Mistake Owners Are Making
Waiting.
Many owners assume:
“If I wait long enough, the bank will come back.”
In 2026, that’s rarely true.
Delaying action often leads to:
Forced sales
Distressed refinancing
Loss of negotiating power
Early planning preserves options.
A New Reality for Small Commercial Owners
This isn’t a temporary blip.
The commercial lending landscape has structurally changed:
Banks are scaling up, not down
Small deals are being de-prioritized
Equity-based lending is becoming essential
Owners who adapt will survive — and often thrive.
Those who wait for the old system to return may be left behind.
Final Thought: Capital Didn’t Disappear — It Moved
Banks stepping back doesn’t mean capital is gone.
It means:
Capital is more selective
More asset-focused
More relationship-driven
For small commercial property owners, private lenders are no longer a backup plan — they’re part of the modern financing stack.
If you have equity, a solid asset, and a plan — there are still solutions.
Your equity deserves more™