$75,000 to $25 million loans

Commercial loans provide the necessary funding for real estate developers, investors, and business owners to finance the purchase, construction, or renovation of properties intended for business use. Financing solutions are available for various property development projects, including apartment buildings, commercial and/or mixed-use properties, and short-term loans for building or renovating properties, including ground-up construction and rehabilitation projects.

What to know about commercial real estate loans

Commercial real estate loans enable businesses to purchase, develop, or renovate commercial properties. Loan amounts vary depending on the property's value and the borrower's financial strength and are subject to a more stringent underwriting process.

Loan types

• Traditional commercial mortgages - Loans for purchasing or refinancing commercial properties, typically with fixed or variable interest rates and repayment terms ranging from 5 to 20 years.
• SBA 504 loans - Offered by the U.S. Small Business Administration, these loans are designed to help small businesses purchase fixed assets like real estate. They usually involve a partnership between a private lender and a Certified Development Company (CDC)
• SBA 7(a) loans - Another SBA-backed option, these loans are more flexible and can be used for various business purposes, including real estate acquisition, construction, and renovation.
• Bridge loans - Short-term loans that provide immediate financing for commercial real estate projects, typically used until long-term financing can be arranged. They usually have higher interest rates due to their short-term nature and increased risk.
• Construction loans - These loans are used to finance the construction of new commercial properties. They are typically short-term and are converted to a traditional mortgage once the construction is complete and the property generates income.
• Hard money loans - These are short-term loans provided by private investors or companies, secured by the value of the property. They often have higher interest rates and are used when traditional financing is not available or is needed quickly.

Loan-to-value (LTV) ratio

• This ratio represents the loan amount as a percentage of the property's value.
• Lower LTV ratios typically result in better loan terms as they indicate less risk for the lender.

Debt service coverage ratio (DSCR)

• This ratio measures a property's ability to cover its debt obligations from its net operating income.
• A higher DSCR indicates better ability to service debt, leading to more favorable loan terms.

Interest rates

• Interest rates on commercial real estate loans can be fixed or variable.
• Fixed rates remain constant over the loan term, while variable rates can change based on market conditions.

Repayment terms

• Commercial real estate loans typically have repayment terms ranging from 5 to 20 years, though some may extend up to 30 years.
• The repayment structure can be amortized or involve a balloon payment at the end of the term.

Down payment

• Borrowers usually need to provide a down payment, typically ranging from 10% to 30% of the property's value, depending on the loan type and lender requirements.

Collateral

• The commercial property being financed usually serves as collateral for the loan. In some cases, additional assets or personal guarantees from business owners may be required.