Business Capital
Commercial Real Estate Financing
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What is Commercial Real Estate Financing?
Commercial real estate financing provides capital to purchase, refinance, or develop commercial properties used for business purposes. This includes office buildings, retail spaces, warehouses, industrial facilities, and multi-family properties.
Unlike residential mortgages, commercial real estate loans are typically based on the property"s income-generating potential and the borrower"s business financials rather than personal income.
Key Benefits
Types of Commercial Properties
Office Buildings
Class A, B, and C office spaces, medical offices, and professional buildings
Retail Spaces
Shopping centers, strip malls, standalone retail buildings, and restaurants
Industrial & Warehouse
Manufacturing facilities, distribution centers, and storage warehouses
Multi-Family
Apartment buildings, condominiums, and mixed-use developments
Special Purpose
Hotels, healthcare facilities, self-storage, and data centers
Land & Development
Raw land, development projects, and construction financing
Commercial Real Estate Financing Options
Conventional Commercial Loans
Traditional bank loans with competitive rates and terms up to 25 years. Best for established businesses with strong financials.
SBA 504 Loans
Government-backed loans for owner-occupied commercial properties. Lower down payments and competitive rates.
Bridge Loans
Short-term financing to bridge gaps between property purchase and permanent financing or property sale.
Hard Money Loans
Asset-based loans with faster approval but higher rates. Ideal for fix-and-flip or distressed properties.
Typical Terms
Commercial Real Estate Loan Requirements
Credit Score
Generally 680+ for conventional loans, 650+ for SBA loans
Down Payment
Typically 20-30% of property value, 10% for SBA 504 loans
DSCR
Debt Service Coverage Ratio typically 1.25x or higher
Documentation
Property appraisal, business financials, tax returns, and business plan
Frequently Asked Questions
For conventional commercial loans, expect 20–30% down. SBA 504 loans are the exception they require just 10% down for owner-occupied properties. Hard money and bridge lenders may require 25–35%+ and have higher rates but faster approval. The down payment depends on the property type, your credit profile, and the lender income-producing properties with strong DSCR may qualify for lower down payments.
DSCR (Debt Service Coverage Ratio) measures whether a property generates enough income to cover its loan payments. It's calculated by dividing the property's net operating income (NOI) by the annual debt service (loan payments). Lenders typically require a DSCR of 1.20–1.35x, meaning the property earns 20–35% more than the debt payments. A DSCR below 1.0x means the property isn't generating enough income to cover the loan a red flag for lenders.
Owner-occupied loans (where your business uses at least 51% of the space) generally offer better terms lower rates, longer amortization, and access to SBA programs. Investment property loans (where you're buying property primarily to lease to others) are evaluated more on the property's income potential and typically require larger down payments and carry higher rates. SBA 504 and 7(a) programs are only available for owner-occupied properties.
Many commercial mortgages have a shorter term but longer amortization for example, a 5-year term with a 25-year amortization. Monthly payments are calculated as if you'll repay over 25 years, but after 5 years, the entire remaining balance (the 'balloon') is due. At that point, you either refinance, sell, or pay off the balance. This is different from residential mortgages, which are fully amortizing.
Conventional commercial loans typically take 45–90 days to close due to underwriting, appraisal, title, and environmental review requirements. SBA loans can take 60–90+ days due to additional government review. Bridge and hard money loans close much faster sometimes 2–3 weeks. Having all documentation ready upfront (financials, tax returns, property info, business plan) is the best way to speed up the process.
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