Real Estate Financing

Commercial Real Estate Loans: A Complete Financing Guide

From owner-occupied office buildings to multi-unit investment properties, this guide covers every commercial real estate financing option, qualification requirements, and how to secure the best terms.

Updated: March 202516 min readBy Premier Access Capital

What Is a Commercial Real Estate Loan?

A commercial real estate (CRE) loan is a mortgage secured by commercial property — as opposed to residential real estate. Commercial properties include office buildings, retail centers, warehouses, industrial facilities, multifamily properties (5+ units), hotels, and mixed-use developments.

CRE loans are evaluated differently than residential mortgages. Lenders focus heavily on the property's income-generating potential (measured by Net Operating Income and Debt Service Coverage Ratio) in addition to the borrower's creditworthiness.

CRE Loan Types Compared

Conventional Commercial Mortgage

6.5–9%
Rate
Up to 75%
Max LTV
5–25 years
Term

Standard commercial mortgage from banks and credit unions. Best for owner-occupied commercial properties with strong financials.

SBA 504 Loan

~6–7% (fixed)
Rate
Up to 90%
Max LTV
10, 20, or 25 years
Term

Government-backed financing for owner-occupied commercial real estate. Lowest down payment available (10%). Requires strong credit and 2+ years in business.

SBA 7(a) Real Estate Loan

Prime + 2.25–4.75%
Rate
Up to 85%
Max LTV
Up to 25 years
Term

Flexible SBA financing that can include real estate as part of a broader business acquisition or expansion loan.

CMBS Loan

6–8%
Rate
Up to 75%
Max LTV
5–10 years (30-year amortization)
Term

Commercial Mortgage-Backed Securities loans are pooled and sold to investors. Non-recourse, fixed-rate, and available for investment properties.

Bridge Loan

8–14%
Rate
Up to 80%
Max LTV
6–36 months
Term

Short-term financing to bridge the gap between purchase and permanent financing. Ideal for value-add properties or time-sensitive acquisitions.

Hard Money Loan

10–18%
Rate
Up to 70%
Max LTV
6–24 months
Term

Asset-based lending for properties that don't qualify for conventional financing. Fast approval, minimal documentation, higher rates.

Key CRE Underwriting Metrics

Debt Service Coverage Ratio (DSCR)

Formula: Net Operating Income ÷ Annual Debt ServiceTarget: 1.25x minimum (most lenders)

The most important metric in CRE underwriting. A DSCR of 1.25 means the property generates $1.25 for every $1.00 of debt payments. Below 1.0 means the property can't cover its own debt.

Loan-to-Value Ratio (LTV)

Formula: Loan Amount ÷ Property ValueTarget: 65–75% typical (lower is better)

Measures how much of the property's value is being financed. Lower LTV means more equity, which reduces lender risk and typically results in better rates.

Cap Rate

Formula: Net Operating Income ÷ Property ValueTarget: Varies by market and property type

The capitalization rate indicates the property's yield independent of financing. Higher cap rates suggest higher returns but also higher risk.

Qualification Requirements

Credit Score
680+ for conventional; 640+ for SBA; lower for bridge/hard money
DSCR
1.25x minimum on investment properties
Down Payment
10–35% depending on loan type and property
Time in Business
2+ years for owner-occupied; varies for investment
Property Appraisal
Required for all CRE loans
Environmental Assessment
Phase I required for most transactions

Finance Your Commercial Property

Our commercial real estate specialists will match you with the right financing structure for your property type, timeline, and financial profile.

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