Everything You Need to Know About Getting a Commercial Real Estate Loan
The decision to pursue a commercial real estate loan is rarely simple. The capital markets are not uniform. Lenders are not interchangeable. The right financing structure for a stabilized multifamily asset in Los Angeles looks nothing like the right structure for a value-add retail acquisition in Phoenix — even if the loan sizes are identical. Understanding this distinction before you engage a lender is the first step toward a successful transaction.
Financial Compound has arranged commercial real estate financing across every major asset class and loan category, totaling more than $5.1 billion, with relationships spanning institutional equity, CMBS, life companies, banks, debt funds, hard money, and government-backed programs. What follows is a practical guide to how commercial real estate loans work — the types available, current rates, qualification requirements, and how the process unfolds from initial inquiry to funding.
Types of Commercial Real Estate Loans
The commercial lending market is not a monolith. Different loan types are engineered for different situations, and matching the capital structure to the business plan is as important as finding a competitive interest rate.
Conventional Bank Loans
The traditional bank loan remains the workhorse of commercial real estate financing for stabilized, income-producing assets. These are portfolio loans — the bank retains the loan on its balance sheet, which means underwriting is more relationship-driven and lender guidelines are more flexible than for agency or CMBS products.
Typical terms: 5- to 10-year fixed or floating rates, amortization schedules of 20 to 25 years, and LTV limits of 65–75%. Banks prioritize DSCR, borrower credit quality, and property type. In today’s tightened credit environment, banks have become more selective, particularly on office and retail assets.
SBA 504 and SBA 7(a) Loans
For owner-occupied commercial real estate, SBA-backed programs offer terms unavailable in conventional lending. The SBA 504 program combines a first mortgage from a bank (typically 50% of the project cost) with a below-market, fixed-rate SBA debenture (up to 40%) — resulting in combined leverage of up to 90%. For a qualifying small business, this program dramatically reduces the equity required to purchase commercial property.
The SBA 7(a) loan is more flexible in application — funds can be used for real estate acquisition, renovation, or debt refinancing — though maximum loan amounts and terms vary. Both programs require that the borrowing entity occupy at least 51% of the property.
Commercial Mortgage-Backed Securities loans are originated by banks and conduit lenders, then pooled and sold to investors on the secondary market as bonds. This structure enables CMBS lenders to offer non-recourse financing at competitive fixed rates — typically with 10-year terms and 25- to 30-year amortization schedules.
CMBS loans are best suited for stabilized assets with strong, predictable cash flows. The trade-off is structural rigidity: CMBS loans are notoriously difficult to modify once securitized, and prepayment penalties (defeasance or yield maintenance) can be significant. Borrowers who anticipate selling or refinancing before loan maturity should carefully model exit costs.
Commercial Bridge Loans
Bridge financing is short-term capital — typically 12 to 36 months — designed to carry a property through a transitional period. A value-add acquisition that needs renovation and re-tenanting before it can support permanent debt is a classic bridge loan candidate. So is an acquisition that needs to close before permanent financing can be fully underwritten.
Bridge loans are floating rate, recourse (typically), and priced at a premium over permanent financing. They are tools with a defined purpose, not substitutes for permanent capital. The exit strategy — permanent refinance, sale, or stabilization — is underwritten with the same care as the loan itself.
Hard money loans are asset-based — the lender’s primary underwriting criterion is the property’s value, not the borrower’s credit profile or income documentation. This makes them accessible in situations where conventional lenders cannot or will not act: properties with deferred maintenance, borrowers with credit challenges, or time-sensitive acquisitions requiring rapid funding.
The cost is real: hard money rates typically range from 9% to 12%+, with shorter terms and higher fees. These loans are rarely a long-term solution, but they can provide decisive short-term capital when the deal economics justify the cost.
Multifamily Agency Loans (Fannie Mae / Freddie Mac)
For multifamily properties of five units or more, Fannie Mae and Freddie Mac provide agency financing that consistently offers the most competitive rates in the market. Non-recourse, long-term fixed rates, and generous amortization structures make agency loans the preferred product for stabilized apartment buildings and multifamily portfolios.
Agency lending programs have specific requirements around property condition, occupancy, and borrower experience. Properties in need of rehabilitation may need bridge financing first, then a transition to agency debt once stabilized.
Construction financing covers ground-up development and major rehabilitation projects. These are short-term, interest-only facilities that advance funds in draws as construction milestones are reached. Lenders underwrite based on projected stabilized value (and income) rather than current asset performance, and they require a complete set of plans, a credible construction budget, permits, and — in most cases — a demonstrated track record of completing similar projects.
Commercial Real Estate Loan Rates in 2025 and 2026
Commercial real estate loan rates are not a single number. They are a function of the benchmark index (10-year Treasury, SOFR, or Prime Rate), the lender’s spread, the property type, the loan structure, leverage, and the borrower’s credit profile. Understanding how these variables interact puts borrowers in a stronger position at the negotiating table.
As of mid-2026, indicative commercial real estate loan rates by loan type are approximately:
Loan Type
Typical Rate Range
Term
Conventional bank (stabilized CRE)
6.25% – 7.50%
5–10 yr
CMBS / Conduit (non-recourse)
6.50% – 7.75%
10 yr
Fannie Mae / Freddie Mac (multifamily)
5.75% – 6.75%
5–12 yr
SBA 504 (CDC debenture portion)
5.50% – 6.50%
25 yr
Bridge / Transitional (floating)
SOFR + 2.50%–4.50%
12–36 mo
Hard money / Private lending
9.00% – 12.00%+
6–24 mo
Life company (core assets)
5.75% – 6.75%
10–25 yr
These are market-level ranges, not guarantees. Actual pricing depends on current lender appetite, asset quality, geography, and deal-specific variables. Commercial mortgage lending is dynamic — the lender offering the most aggressive terms on a multifamily asset in one quarter may be at the top of their allocation by the next.
A note on current market conditions: The CBRE Lending Momentum Index rose over 100% year-over-year in 2025, signaling a meaningful recovery in commercial lending activity from the volume contraction of 2023–2024. With the prime rate stabilizing, more lenders are actively deploying capital — and that competition is beginning to compress spreads, particularly in the multifamily and industrial sectors. Borrowers who were waiting on the sidelines are returning to the market.
Commercial Real Estate Loan Requirements: What Lenders Evaluate
Getting a commercial real estate loan approved requires meeting both asset-level and borrower-level underwriting standards. The property does most of the heavy lifting, but the borrower is never invisible.
Debt Service Coverage Ratio (DSCR)
DSCR is the single most important metric in commercial real estate underwriting. It measures the property’s net operating income (NOI) as a multiple of its annual debt service (principal and interest).
DSCR = Net Operating Income ÷ Annual Debt Service
Most conventional lenders require a minimum DSCR of 1.20x to 1.25x. Agency multifamily lenders typically require 1.25x. A ratio below 1.0x means the property does not generate enough income to cover its debt payments — a condition that eliminates conventional financing options and pushes the borrower into bridge or hard money territory.
Understanding your DSCR before approaching lenders helps you right-size your loan request and identify the appropriate lender category for your situation.
Loan-to-Value Ratio (LTV)
LTV measures the loan amount as a percentage of the property’s appraised value. Most conventional commercial lenders will advance 65–75% LTV. Agency multifamily lenders may go to 80%. SBA programs can reach 90% in combination.
Commercial real estate appraisals rely primarily on the income approach — the property is valued based on its capitalized NOI rather than comparable sales. A borrower who understands how their property will be valued by an appraiser using market cap rates can anticipate the appraised value before the process begins.
Credit and Borrower Profile
Conventional bank lenders typically look for:
Minimum credit score: 680–720+ (varies by lender and product)
Post-closing liquidity: 6–12 months of projected debt service
Net worth: Often equal to or greater than the loan amount
Real estate experience: Especially relevant in value-add, development, and bridge scenarios
Global cash flow: Total cash flow across all properties and business interests, not just the subject property
For full-recourse loans, the borrower’s complete financial picture matters. For non-recourse products (CMBS, agency), asset performance dominates.
Property and Asset Requirements
Lenders evaluate property type, condition, occupancy, lease quality, location, and market fundamentals. A 95%-occupied industrial building with a long-term credit tenant underwrites very differently from a 70%-occupied strip mall in a secondary market with short-term leases. Lenders assign their capital accordingly, and understanding where your asset sits in this spectrum helps you identify the right lender before wasting time with the wrong one.
How to Apply for a Commercial Real Estate Loan
The commercial real estate loan process is more involved than a residential application. Here is how it typically unfolds when working with Financial Compound:
Step 1: Initial Consultation and Loan Sizing We begin with a conversation about the property, the business plan, and the borrower’s profile. From this, we develop a picture of the appropriate loan structure — product type, lender category, and indicative sizing — before any formal application is submitted.
Step 2: Market Outreach and Lender Identification. Financial Compound maintains active relationships with hundreds of capital providers across every lending category. We identify which lenders are currently active, well-priced, and appropriate for your specific transaction — not just who is lending in general, but who has appetite for this property type, geography, and loan size right now.
Step 3: Term Sheet and Negotiation. We present your transaction to targeted lenders and obtain competing term sheets. Most borrowers approach a single lender and accept the first offer. We run a structured process that produces competitive options and genuine leverage at the negotiating table.
Step 4: Application, Due Diligence, and Underwriting. Once terms are agreed, the formal application package is submitted. This typically includes: operating statements (T-12), rent roll, borrower financial statements, personal financial statement, tax returns, entity documents, and property information. We help organize and present this documentation in the format lenders prefer.
Step 5: Appraisal, Inspection, and Third-Party Reports: Lenders will order an independent appraisal, an environmental report (Phase I minimum), and, often, a property condition report. The timeline and sequencing of these reports can significantly affect closing speed.
Step 6: Loan Commitment and Closing. Following underwriting approval, the lender issues a formal loan commitment. Closing follows, typically 30–60 days after commitment for conventional loans, though bridge and hard money transactions can close significantly faster.
Why Work with a Commercial Mortgage Broker?
The case for working with a commercial mortgage broker is not complicated: the commercial lending market is large, fragmented, and changes constantly. A lender that was aggressively pricing retail loans three months ago may have internally restricted that category. A debt fund that was quiet during the rate peak may be actively deploying capital at attractive spreads today.
A borrower approaching the market without a broker is, in effect, shopping at one or two stores in a city with hundreds of options. They will get a loan — but probably not the best one available to them.
Financial Compound brings institutional-level market intelligence to every transaction. We know which lenders are active, where the most competitive pricing currently lives, and how to structure and present a transaction to maximize its chances of approval. Our weekly internal credit training — part of our University of Financial Technologies program — exists precisely because “who is the best lender for this deal?” is a question whose answer changes week to week, and staying current is not optional.
Our results speak plainly: over $5.1 billion financed across more than two decades of active deal-making, including transactions that other brokers and direct lenders had declared unfeasible.
Frequently Asked Questions
What is the minimum loan amount for a commercial real estate loan? Most conventional commercial mortgage lenders have minimum loan sizes of $500,000 to $1,000,000. Smaller loans may require a community bank, credit union, or SBA program. Some hard money and private lenders will go below $500,000.
What is a typical down payment for a commercial real estate loan? Conventional commercial loans typically require 25–35% down (65–75% LTV). SBA 504 loans can reduce the borrower equity requirement to as little as 10%. Agency multifamily loans may allow 20–25% down for qualifying properties.
How long does it take to close a commercial real estate loan? Conventional bank and CMBS loans typically take 45–90 days from application to close. Bridge and hard money loans can close in 2–4 weeks, depending on the case. SBA loans often require 60–90 days or longer due to government review timelines.
Can I get a commercial real estate loan with bad credit? Conventional lenders require strong credit. Bridge lenders are more flexible. Hard money lenders underwrite primarily on the asset and may work with credit-challenged borrowers, though at a higher cost. The right answer depends on the property, the loan need, and the timeline.
What is a balloon payment in commercial real estate? Most commercial mortgages have amortization schedules longer than their loan terms. For example, a 10-year loan amortized over 25 years will have a lump-sum “balloon” payment due at the end of the 10-year term. Borrowers typically refinance the balloon rather than paying it in cash.
What documents do I need to apply for a commercial real estate loan? Standard documentation includes: 2 years of tax returns (business and personal), a trailing 12-month property operating statement, a rent roll, a personal financial statement, entity organizational documents, and property information (address, description, purchase contract or title if refinancing).
Get Started: Apply for a Commercial Real Estate Loan
The form at the top of this page initiates a direct conversation with Financial Compound’s loan origination team. There is no obligation, no application fee, and no algorithmic pre-screening. We review every inquiry personally and respond within one business day.
If you prefer to speak directly: +1-310-260-5900 x3 | Mon–Fri, 9:00 AM – 6:00 PM PT
Financial Compound is a commercial mortgage brokerage based in Santa Monica, CA. We arrange commercial real estate loans, commercial mortgage refinancing, SBA financing, bridge loans, and construction financing for borrowers throughout California and nationwide.
