Financing Hard-to-Finance Property: The Main Options

Some properties are hard to finance through a bank: a vacant or half-renovated building, a hotel whose income has not recovered, a mixed-use property with an unusual tenant mix, or any building whose owner needs to close faster than a bank can approve. The property may be perfectly sound. It just does not fit the lender’s rules.

This guide is for owners and buyers who have been turned down by a bank, or expect to be. It explains why banks say no, then maps the main alternatives, what each one costs you in money or control, and where to read more. Each option has its own article on this site.

Why banks say no

A bank or other institutional lender lends mostly against predictable income. It wants to see that the property’s net operating income covers the loan payments with room to spare, that the building is in a condition it can value and resell, and that the borrower has the experience and the balance sheet to stand behind the loan. A deal is hard to finance when one of those is missing:

• No reliable income yet. Vacant buildings, properties under renovation, and hotels with weak or uneven trading history.
• Condition or use. Deferred maintenance, environmental questions, special-purpose buildings or unusual zoning.
• The borrower. Limited experience with the property type, a credit problem, or a new company with no track record.
• Timing. An auction, a power-of-sale or foreclosure purchase, or a deadline that a bank’s approval process cannot meet.
• Size of the gap. The bank will lend, but not enough, and the buyer cannot fill the difference with cash.

The right alternative depends on which of these is the problem. Money that solves a timing problem is not the same as money that fills a long-term gap in the capital stack.

The options at a glance

Alternatives to a bank mortgage for hard-to-finance property

Option	What it solves	What it costs you	Main risk
Private or hard-money loan	Speed; vacant or distressed property; credit issues	High interest and upfront fees	Short term: the loan matures before the plan is finished
Bridge loan	A gap in time, until a sale, refinance or stabilization	Higher rate than permanent debt	The planned exit is delayed
Seller financing (vendor take-back)	The bank will not lend the full price	Negotiated interest; sometimes a higher price	A balloon payment that must be refinanced
Land contract or lease option	Buyer cannot get a mortgage yet	Option fees or instalments	Buyer has no title until the end; can lose payments
Borrowing against other assets	Lender wants more security than the new property gives	Interest on the extra borrowing	The pledged home or property is at risk
Mezzanine, participating or convertible capital	A gap between senior debt and equity	Higher interest or a share of the profits	Expensive if the project does well; complex terms
Joint venture equity	Not enough equity, or missing expertise	A share of ownership, profits and control	Disagreements between partners
Government-backed programs	Lender needs a guarantee or the project has a public purpose	Paperwork and eligibility conditions	Program rules exclude many investment properties

Debt from private and short-term lenders

Hard money and private loans are underwritten mainly on the property’s value and your plan to repay, so they can fund what a bank will not, quickly. They are expensive, and they work only if there is a realistic exit by the time the loan matures. In Nova Scotia, anyone in the business of lending money secured by real property, and any mortgage broker, must hold a licence under the Mortgage Regulation Act unless exempted, so check the lender’s licence before you sign.[1]

Bridge loans solve a timing gap: buying before you sell, closing before permanent financing is ready, or carrying a property through a lease-up. If the property is already in trouble, see our article on financing options when your property is in distress.

In Canada, the Criminal Code caps interest at 35% a year, counting fees, but business loans to companies are treated differently: loans above $500,000 are not capped, and loans above $10,000 up to $500,000 may charge up to 48%.[2] That is a legal ceiling, not a benchmark, and the structure of a deal can change which rule applies.

Financing from the seller

When the seller is willing to be paid over time, the buyer needs less from the bank. A vendor take-back mortgage (called seller carry-back or owner financing in the U.S.) lets the buyer take title at closing while the seller holds a mortgage for part of the price. Land contracts and lease options leave title with the seller until the buyer has paid or exercises an option; they are mostly a U.S. arrangement and carry more risk for the buyer.

Using what you already own

If you have equity in a home or other property, a lender may accept it as extra security. Our article on home equity, credit lines and cross-collateralization explains the limits, including the 65% cap on Canadian home equity lines of credit, and the main risk: the asset you pledge is what you lose if the new project fails.

Capital that shares the upside

Between a bank loan and outright ownership there is a range of hybrid capital. Mezzanine loans and preferred equity sit behind the senior lender and charge more for the extra risk; our guide to debt and equity financing for hotels and apartment buildings explains where they fit. Participating loans, profit-sharing agreements and convertible notes give the funder a share of the profits or the right to become an owner. In Canada, interests offered to investors on these terms are generally securities.[3]

Full equity partners bring money, and often experience, in exchange for ownership and a say in decisions. See our guide to joint ventures for hotel and apartment projects. Raising smaller amounts from many investors online is covered in real estate crowdfunding.

Government-backed programs

Government programs share the lender’s risk or support projects with a public purpose, such as rental housing or energy efficiency. They are worth checking, but they come with eligibility rules:

• United States: SBA 7(a) and 504 loans can finance property that the borrower’s own business occupies, including hotels that meet the SBA’s short-stay test. Apartment buildings are not eligible.[4]
• Canada: the Canada Small Business Financing Program shares risk on small-business loans of up to $1.15 million, including for real property.[5] Other federal and provincial programs are covered in government incentives for hotel and apartment projects.
• U.S. retirement savings: a self-directed IRA can own real estate under strict rules. Canadian RRSPs and TFSAs cannot hold property directly.

How to choose

1. Name the real problem

   Is it timing, income, condition, your track record or the size of the gap? Each points to a different option.

2. Ask the bank exactly why it said no

   The answer tells you what has to change for the property to become bankable later.

3. Match the term to the plan

   Short-term money for short-term problems; equity or long-term capital for long-term gaps.

4. Compare the full cost

   Fees, interest, profit shares and the value of any control you give up, over the time you expect to need the money.

5. Check who you are dealing with

   Licences for lenders and brokers, references for partners, and registration or exemptions for any investment offering.

6. Get independent advice

   A lawyer and an accountant should review the terms before you sign.

UBU Financial works with owners and buyers of hotels, apartment buildings, mixed-use and distressed property in Nova Scotia and California. This article is general information, not financial or legal advice.

Sources

1. Mortgage Regulation Act, S.N.S. 2012, c. 11 — Nova Scotia House of Assembly, Office of the Legislative Counsel, Consolidated to November 1, 2021. Checked 2026-10-12.
2. Criminal Interest Rate Regulations: SOR/2024-114 — Canada Gazette, Part II, June 19, 2024. Checked 2026-10-12.
3. Securities Act, R.S.N.S. 1989, c. 418, section 2 (definition of “security”) — Nova Scotia House of Assembly, Office of the Legislative Counsel. Checked 2026-10-12.
4. SOP 50 10 8: Lender and Development Company Loan Programs (copy hosted by the Coleman Report) — U.S. Small Business Administration, Effective June 1, 2025. Checked 2026-10-12.
5. Helping small businesses get loans — Innovation, Science and Economic Development Canada (Canada Small Business Financing Program). Checked 2026-10-12.