Industrial, warehouse and flex financing.

Two different loans, often confused

Almost every industrial enquiry is one of two things, and they underwrite completely differently.

Owner-occupied means your own business operates from the building. The loan is underwritten primarily on that business’s cash flow rather than on a rent roll — the lender is really asking whether your operating company can carry the payment. That usually means a smaller down payment and more flexibility on the property itself than an investor would get on the same building.

Investor-owned means tenants occupy the building and you collect rent. The loan is underwritten on the property’s income and lease quality rather than your operating business.

If you are buying a multi-tenant or purely investment industrial property, our commercial real estate page is the better starting point. This page is written mainly for the owner-operator.

What we finance

Why owner-occupiers keep buying

Industrial has been the tightest major commercial property type for several years, which shows up as rent increases at renewal. For a business paying that rent, ownership converts an uncontrollable operating cost into a fixed one, and the equity accrues to the operator rather than the landlord.

The financing follows that logic. Because a lender can underwrite your actual operating business rather than a projected tenant, owner-occupied industrial is one of the more straightforward commercial deals to close — assuming the business genuinely supports the payment.

What a lender evaluates

• The occupying business. On owner-occupied deals this is the main event: cash flow, trend, and whether it services the new debt with room to spare.
• Occupancy share. Owner-occupied programs require the business to occupy a defined portion of the space. Leasing out the rest is often fine — up to a point.
• The building itself. Clear height, column spacing, loading, power, and the office-to-warehouse ratio. A building that only suits one tenant is financed more cautiously.
• Environmental condition. Industrial sites carry real environmental history. Expect at least a Phase I.
• Zoning and use. Particularly for yards, outdoor storage, and anything with a specialised process.
• Location and labour. Access to highways and to the workforce the operation needs.

The environmental question

This is the part that surprises buyers and the part that most often sets the timeline. A Phase I Environmental Site Assessment is standard on industrial property. It is a records and site review rather than testing, and most come back clean.

Where a Phase I flags a recognised environmental condition — a former use, a neighbouring site, underground tanks — a Phase II with sampling may follow. That can add weeks and real cost. It is not a reason to avoid industrial; it is a reason to order the report early and price the possibility in from the start.

How these deals are usually structured

Most owner-occupied purchases are written as a conventional commercial mortgage: a fixed or adjustable first lien, amortized over a term that reflects the building’s remaining useful life, underwritten on the occupying business. Expect a balloon before full amortization on many conventional structures — the maturity and the amortization schedule are two different numbers, and the gap between them is one of the first things to pin down.

For small investor-owned industrial, financing is underwritten on the property’s income, leases and condition instead, and leverage generally follows the quality and remaining term of the tenancy.

Government-guaranteed options exist for owner-occupiers too and can change the leverage materially. Those are covered separately on our SBA 7(a) & 504 page.

Common questions