Commercial Real Estate Loans

A commercial real estate loan is financing secured by a commercial property rather than a primary residence. The category covers a wide range of asset types: multifamily apartment buildings with five or more units, office buildings, retail centers, industrial warehouses, mixed-use properties, self-storage facilities, hotels and specialty use properties. What they share is that the property itself generates income or serves a business purpose, and the loan is underwritten based on that income and the property's value.

Commercial real estate loans work differently from residential mortgages. The underwriting focuses on the property's Net Operating Income and its ability to cover the debt service, not primarily on the borrower's personal income. Loan terms are typically shorter than a 30-year residential mortgage, with fixed periods of 5, 7 or 10 years followed by a balloon payment or refinance. Amortization can be 20 to 30 years, which keeps monthly payments lower while the loan pays down over time.

We connect investors and business owners with commercial real estate financing through our network of capital sources, including banks, credit unions, CMBS lenders, debt funds and life insurance companies. The right capital source depends on the asset class, loan size, property location and the borrower's goals. We do the matching so your deal reaches the lender most likely to approve and fund it.

Acquisition financing is the most common commercial real estate loan type. You are purchasing a stabilized or lightly value-add commercial property and need to finance a portion of the purchase price. Most lenders advance 65 to 75 percent of the purchase price on a stabilized asset, requiring the buyer to bring 25 to 35 percent equity to the deal.

Refinancing an existing commercial real estate loan is another major category. Borrowers refinance to lower their interest rate when they come up for renewal, to extend the loan term, or to pull out equity through a cash-out refinance. Cash flow from commercial properties and property appreciation both create equity that can be monetized without selling the asset.

Owner-occupied vs. investment commercial real estate financing are meaningfully different products. Owner-occupied commercial real estate, where the business that owns the property also operates from it, qualifies for SBA 504 financing, which offers fixed interest rates, 25-year amortization and down payments as low as 10 percent. Investment commercial real estate is underwritten on the property's rental income and market cap rate.

SBA 504 for owner-occupied commercial real estate is one of the most powerful tools available to small business owners who want to own their space instead of leasing. The 504 program finances up to 90 percent of the project cost with a fixed interest rate on the SBA debenture portion and a 25-year term. It requires the borrowing business to occupy at least 51 percent of the property.

Multifamily properties with five or more units fall into the commercial real estate loan category, though agency programs from Fannie Mae and Freddie Mac provide specific non-recourse financing for multifamily assets. Small multifamily properties with 5 to 20 units can be financed through community banks, credit unions and portfolio lenders who specialize in this asset class at competitive rates.

Commercial real estate loan interest rates vary based on the capital source, the asset class, the loan size and the borrower's financial strength. Rates in our network currently start around 6.49 percent for stabilized assets financed through banks and credit unions. Debt fund bridge financing for value-add deals carries higher rates to reflect the additional risk. CMBS and agency financing offer competitive fixed rates on qualifying assets.

The loan term for commercial real estate financing is typically a fixed period of 5, 7 or 10 years. At the end of the fixed period, the loan either balloons (requiring a payoff or refinance) or adjusts to a floating rate. Many borrowers refinance before the balloon date if rates have improved or the property has appreciated. Some commercial construction loans convert to permanent financing with a single closing.

Amortization on commercial real estate loans runs 20 to 30 years depending on the program. A 30-year amortization schedule produces lower monthly payments than a 20-year schedule on the same loan amount. The difference matters to cash flow: lower payments improve the property's DSCR and free up operating cash.

The down payment required for a commercial real estate loan depends on the loan program and property type. Conventional commercial mortgages through banks and credit unions typically require 25 to 35 percent down on investment properties. The stronger the property's income and the lower the loan-to-value ratio, the better the rate and terms you can negotiate.

SBA 504 loans for owner-occupied commercial real estate offer the lowest down payment requirement in the commercial space, as low as 10 percent in many cases. This makes the 504 program especially valuable for business owners who want to purchase their operating location rather than continue leasing.

Bridge financing for value-add commercial properties typically requires 25 to 30 percent equity in the transaction at closing, with the lender advancing 70 to 75 percent of the cost. Lenders underwrite bridge deals on the property's projected value after the business plan is executed, not just the current as-is value. Having a clear business plan and realistic projections strengthens your file.

Qualifying for a commercial real estate loan starts with the property. Lenders look at the Net Operating Income, the Debt Service Coverage Ratio, the property's physical condition and location. A DSCR of 1.20 to 1.25 or higher is the baseline most lenders require. That means the property generates at least 20 percent more income than the annual loan payment.

Sponsor strength matters alongside property income. Lenders review the borrower's financial statement, credit score, real estate experience and liquidity. Most commercial lenders want to see a personal credit score of 650 or higher, meaningful liquidity after closing and a track record that supports the deal type. First-time commercial buyers can offset limited experience with a stronger asset, more equity in the deal or a co-sponsor with relevant history.

We package your deal to present both the property income picture and the sponsor profile clearly to the capital sources in our network. The right presentation to the right lender is what moves a deal from pending to approved. Submit your deal summary and we will review eligibility and identify the best path forward.