Self-Storage Financing in Ontario: What You Need to Know

In Ontario, lenders generally require a 30% to 40% down payment for self-storage properties.

This expectation is based on historical lending practices and market risk assessments.

Exact requirements can vary by lender and deal structure, but lower down payment options are rare in this sector.

In Ontario, self-storage lending decisions are typically made based on the current net operating income (NOI), not future projected income.
Lenders prioritize actual occupancy, rental rates, and operating expenses to determine loan eligibility.

Most expect to see a debt service coverage ratio (DSCR) of at least 1.25 to 1.35, depending on the strength of the facility.

In Ontario, it is standard practice for lenders to require a Phase 1 Environmental Site Assessment (ESA) from an approved environmental firm.
If any issues are identified, a Phase 2 ESA (more detailed testing) may be required before financing can proceed.

Environmental compliance is a critical part of commercial lending risk management in this province.

Many lenders in Ontario prefer self-storage financing opportunities where the loan amount exceeds $1 million.

Facilities priced too low — especially those under $1.5 million total value — may be considered too small for many commercial lending programs.
Alternative financing options may be necessary for smaller properties.

In Ontario, lender interest is often focused on self-storage facilities located in major urban centers, fast-growing suburbs, or strong secondary markets.

Facilities in remote or rural areas may face difficulty securing financing, even with solid financial performance.

Market strength and future demand projections play an important role in a lender's underwriting decision.

In Ontario, borrowers should be prepared to submit comprehensive documentation, including:

• Three years of historical financial statements (if available)
   
• Current rent rolls and occupancy reports
   
• Detailed operating expense statements
   
• Environmental site assessments
   
• Borrower resumes, corporate profiles, and net worth statements
   

Solid, transparent documentation can make or break an application.

If you are developing a new self-storage facility in Ontario, you’ll typically require construction financing first, followed by take-out financing once the project is stabilized.
Construction financing usually involves:

• Higher equity requirements (typically 40% or more)
   
• Feasibility studies or third-party appraisals
   
• Pre-leasing strategies and solid exit plans
   

New developments are scrutinized closely by lenders before approvals are issued.