Understanding Commercial Real Estate Loans
Commercial real estate lending is fundamentally different from residential: the asset's net operating income is the primary underwriting question. Get the NOI and the debt service coverage right and financing follows, largely regardless of what your personal tax return looks like.
Commercial Real Estate Loans terms at a glance
Commercial Real Estate Loans - typical parameters
Illustrative market ranges. Your actual terms depend on lender underwriting, credit, collateral and program availability.
| Loan amount | $250,000 - $50,000,000+ |
|---|---|
| Speed to funding | 30 - 60 days |
| Interest rate | 6.25% - 12% |
| Loan-to-value | Up to 80% |
| Term | 5 - 30 years |
| Amortisation | 20 - 30 years |
| DSCR requirement | 1.20 - 1.35 minimum |
| Minimum credit score | 650 |
| Recourse | Recourse and non-recourse available |
| Property types | Office, retail, industrial, multifamily, mixed-use, special purpose |
How Commercial Real Estate Loans can help you
Commercial property financing is where the structure of the loan matters as much as its price. The right term, amortisation and recourse position can be worth more than a half point of rate.
The property qualifies largely on its own merit
If a building produces $340,000 of net operating income and the proposed debt service is $250,000, the coverage ratio is 1.36 and the deal works. Your personal income matters far less than it would on a house. Investors whose returns show minimal taxable income routinely finance eight-figure assets this way.
You can operate from a building you own
Owner-occupied commercial property converts rent - a permanent, escalating expense - into equity in an appreciating asset, and it locks in your occupancy cost. Between conventional CRE debt and the SBA 504, most operating businesses have a viable path to ownership.
Non-recourse protects everything outside the deal
On stabilised assets with strong coverage, non-recourse financing limits the lender's remedy to the property itself. Standard carve-outs for fraud and waste still apply, but your other assets sit outside the deal. For investors building a portfolio, this containment is structurally important.
Long amortisation transforms cash flow
A $3,000,000 loan at 7% amortised over 20 years costs roughly $23,260 a month. Stretch to 30 years and it is about $19,960. That $3,300 a month is $39,600 a year of additional cash flow from the same asset at the same rate - purely a function of structure.
Value-add plays can be financed in stages
Buy under-performing, reposition with bridge or construction debt, stabilise the rent roll, then refinance into long-term permanent financing at the improved value. Pricing all three legs before you buy is how experienced sponsors avoid getting trapped at the refinance.
How the process works
Submit the deal
Purchase contract or current debt details, rent roll, trailing-12 operating statements, and a personal financial statement and schedule of real estate owned.
Sizing and lender selection
We calculate NOI, DSCR and maximum proceeds, then place the file with the capital source whose box actually fits - bank, credit union, agency, CMBS, debt fund or private.
Term sheet and third-party reports
You review real terms. On acceptance, appraisal, environmental Phase I and property condition reports are ordered - the usual critical path items.
Underwriting, closing and funding
Legal, title, insurance and final underwriting. Most stabilised commercial transactions close 30 to 60 days from a complete package.
What you will need to qualify
- Purchase contract or existing loan documents
- Rent roll and trailing-12 operating statements
- Personal financial statement
- Schedule of real estate owned
- 650+ credit score
- 20% - 35% down payment
- Property-level DSCR of 1.20+
The honest drawbacks
What we would want to know if we were you
Watch the balloon. A great many commercial loans amortise over 25 or 30 years but mature in 5, 7 or 10 - meaning the entire remaining balance is due on a date certain, in whatever rate environment happens to exist then. Borrowers who ignored 2021 maturities discovered this painfully in 2024. Know your maturity date, and begin planning the refinance or sale at least eighteen months ahead.
Commercial Real Estate Loans - frequently asked questions
Debt service coverage ratio is net operating income divided by annual debt service. At $340,000 NOI and $250,000 of debt service, DSCR is 1.36. Most lenders want 1.20 to 1.35 minimum; stronger coverage generally unlocks higher proceeds or better pricing.
Typically 20% to 35%, driven by property type and the strength of the income. Multifamily and industrial with solid rent rolls sit at the low end. Hospitality, special-purpose assets and anything with vacancy risk sits at the high end.
Non-recourse limits the lender to the property, which is clearly preferable if you can get it, and it usually costs a modest premium in rate or proceeds. It generally requires a stabilised asset, strong coverage and an experienced sponsor. Recourse deals price better and are easier to obtain.
Yes, through bridge or value-add debt sized on stabilised pro forma rather than current income. Expect higher pricing, an interest reserve, and a shorter term - the plan is to lease up and refinance into permanent debt.
Yes - self-storage, hospitality, medical office, restaurants, car washes, churches, marinas and more. These require lenders who understand the asset class, which is exactly what a brokered placement is for. Expect somewhat lower leverage than on generic commercial space.
Related commercial real estate programs
Commercial Real Estate Loans sits alongside a number of related structures. If your situation is close to but not quite this product, one of these is probably the better fit - and the same single application reaches all of them.
- Portfolio Loans - One loan across multiple properties, underwritten as a single pool with a single payment.
- Mixed-Use Property Loans - Financing for buildings that combine ground-floor commercial with residential above.
- Commercial Land Loans - Acquisition capital for raw, entitled or infill land ahead of development.
- Permanent Financing - The long-term, fully amortising debt that takes out your construction or bridge loan.
- Mezzanine Real Estate Loans - Subordinate debt that raises total leverage without giving up ownership.
- Acquisition & Development Loans - Combined land purchase and horizontal-improvement financing for subdivisions and pads.
- Refinance (Commercial & Investment) - Replace maturing, expensive or misstructured debt with better terms.
- Blanket Mortgages - A single mortgage secured by several properties, with release clauses as you sell.