Why cannabis property financing is different
Buying a cannabis facility is harder to finance than buying an ordinary industrial building. The property is specialised, the regulated market has been through a hard reset, and the licence that makes the building productive belongs to the operator, not the real estate. Health Canada licences are site specific and generally not transferable (Health Canada), so a lender cannot simply take over the licence if a borrower defaults.
Market conditions add to the caution. MJBizDaily reported in November 2023 that about one-third of Canada's licensed indoor and greenhouse cultivation capacity had been taken offline since mid-2020, and cited overproduction, falling prices, higher operating costs and excessive debt as causes (MJBizDaily). Lenders read the same news. As a result, the financing a buyer can get often sets the practical ceiling on what the buyer can pay.
Where buyers find the money
| Source | What to know |
|---|---|
| Banks and credit unions | Appetite varies by institution and over time. Expect close review of the licence, the operator and what the building is worth to a non-cannabis user. |
| Farm Credit Canada | Finances corporations and individuals directly involved in cannabis production; requires the appropriate Health Canada licence before applying; does not finance third-party investors or retail (FCC). |
| Private lenders | Often move faster and accept more risk, at higher cost and shorter terms. Many deals are arranged through mortgage brokers. |
| Vendor take-back (seller financing) | The seller lends part of the price, usually secured by a mortgage behind a first lender. |
| Sale-leaseback | An operator sells its building to an investor and leases it back, freeing up capital. |
| Equity and partners | Cash from owners, investors or strategic partners reduces how much must be borrowed. |
Farm Credit Canada
FCC's cannabis page asks applicants for information on management and compliance (including a designated compliance officer), marketing plans and provincial arrangements, positive cash-flow projections, operating requirements, security and guarantees, and which Health Canada licence types the business needs (FCC). When FCC opened its full lending portfolio to licensed producers in 2020, MJBizDaily reported that it assessed eligibility case by case, reimbursed up to 50% of construction costs after completion and licensing, and typically amortized new loans over 7 to 10 years (MJBizDaily, Mar 2020). Check current terms directly with FCC; those figures are from 2020.
Private lenders and mortgage brokers
If a buyer is working through a mortgage broker in BC, the BC Financial Services Authority keeps a public list of mortgage brokers and submortgage brokers "currently registered under the Mortgage Brokers Act" (BCFSA). Checking registration is a simple first step for buyers and sellers alike.
What lenders look at
- The operatorLicence status and history, compliance record, management experience and financial statements.
- The appraisalAn independent valuation, usually by an appraiser with the AACI designation, which covers commercial and agricultural property (AIC). See valuing a cannabis facility.
- Alternative useWhat the building would be worth, and to whom, if cannabis production stopped. See repurposing a cannabis facility.
- Land useZoning, local government approvals and Agricultural Land Reserve status. See zoning and ALR.
- Condition reportsBuilding, systems and environmental information. See due diligence.
- InsuranceWhether the property can be insured, including if it becomes vacant. See insuring a vacant facility.
- Security and guaranteesWhat else the borrower and its principals can pledge or guarantee.
Vendor take-back mortgages
In a vendor take-back (VTB), the seller finances part of the price. Instead of receiving all the money at completion, the seller receives payments with interest over time, secured by a mortgage registered against the property. In a typical arrangement, the VTB ranks behind a first mortgage from a bank or other lender (Insight Law).
A VTB can widen the pool of buyers and support a higher price, but the seller takes on lender risk. If the buyer defaults, recovery in BC runs through the courts. Foreclosure starts with a petition in BC Supreme Court, the default redemption period is six months (a court can shorten or extend it), and any sale needs court approval (People's Law School, BC). If the seller's mortgage is second in line, the first lender is paid first from any sale.
Terms sellers usually negotiate with their lawyer include the amount and term, interest rate and payment schedule, priority and any postponement to a new first lender, prepayment, default provisions, insurance, and personal or corporate guarantees. None of these are standard; all are deal-specific.
A seller who lends money on a specialised building is making a loan, not just a sale. Have a BC lawyer draft the mortgage and review the buyer's other financing before agreeing to a VTB.
Sale-leasebacks
In a sale-leaseback, an operator sells its facility to an investor and signs a lease to stay in it. The operator gets cash; the investor gets a property with a tenant in place. In the United States this is an established cannabis financing tool: Cannabis Business Times reported more than $200 million in cannabis sale-leaseback deals closed in 2022, with Innovative Industrial Properties among the named buyers, and noted that cannabis cap rates widened as interest rates rose (Cannabis Business Times, Apr 2023).
In Canada, publicly reported cannabis sale-leasebacks are rarer. One example shows both the appeal and the risk. In November 2023 Cronos Group agreed to sell its Peace Naturals campus in Stayner, Ontario for $23 million cash to Future Farmco Canada and lease it back for an initial five-year term with a renewal option. Closing was conditional on the buyer's financing, a Health Canada perimeter approval and final lease terms (Cannabis Prospect Magazine). In May 2024 Cronos terminated the deal because the buyer "did not satisfy or waive its due diligence and financing condition" by the deadline (Cronos Group).
For a landlord or investor thinking about buying a facility with a cannabis tenant in place, see leasing to a cannabis tenant and cannabis tenant default.
What financing means for sellers
A seller's price is only as good as the buyer's ability to close. Financing affects three things sellers care about:
- Price: buyers can only pay what they can finance or fund in cash. A thin lending market tends to hold prices down.
- Certainty: a financing condition gives the buyer a way out. Rubicon Organics' 2025 agreement to buy the Hope, BC facility was initially subject to due diligence, financing and board approval (Rubicon Organics); the deal closed in June 2025 as a $4.5 million cash sale (MediPharm Labs). The Cronos example above shows the other outcome.
- Terms: sellers sometimes accept a lower price for a cash or unconditional offer, or a higher price with a VTB, longer conditions or a leaseback.
Help the buyer's lender say yes
Sellers can shorten financing periods by having a property package ready before listing: building permits and occupancy records, plans and site drawings, recent property tax and assessment notices, utility capacity and consumption records, service contracts, any leases, and existing building or environmental reports. A lender that gets complete information early is more likely to issue a commitment within the condition period, and a buyer who knows the package exists is more likely to agree to a shorter one.
Questions worth asking about any offer: Who is the lender and have they financed this type of property before? Has the buyer provided proof of funds or a term sheet? How long is the financing condition, and what happens to the deposit if it is not removed?
How Sean can help
Sean Phillips, REALTOR® with Coldwell Banker Executives Realty, is licensed across British Columbia and sells cannabis and other commercial facilities. He can help sellers compare offers on price, conditions and financing strength, and help buyers assemble the property information lenders ask for. His background includes more than 276 Health Canada licence applications as a site-evidence and licensing-readiness consultant since 2014. Paid consulting, such as a pre-purchase site audit, is quoted per site. See consulting, buying a facility, or contact Sean.