Everything You Need to Know About Commercial Real Estate Loans

When it comes to building wealth through real estate, commercial properties offer a world of opportunity. But unlike residential real estate, commercial deals typically require more capital and more complex financing. Whether you're buying an office building, retail center, multifamily property, or industrial space, understanding commercial real estate loans is crucial.

In this guide, we’ll break down everything you need to know—from loan types and terms to qualification criteria and tips for success.

What Is a Commercial Real Estate Loan?

A commercial real estate loan (CRE loan) is a type of mortgage specifically designed to help businesses purchase, refinance, or renovate income-producing properties. These loans are used for properties that generate rental income or serve as operational headquarters for a business.

Unlike residential mortgages, commercial loans are generally made to business entities—such as LLCs, partnerships, or corporations—not individuals.

Common Types of Commercial Real Estate Loans

There are several types of commercial loans available, depending on your project, property type, and financial profile:

1. Traditional Commercial Mortgages

These are standard loans provided by banks or credit unions, typically with 5-20 year terms and fixed or variable interest rates.

2. SBA Loans (Small Business Administration)

• SBA 7(a) Loans – Ideal for smaller properties or owner-occupied real estate.

• SBA 504 Loans – Used for purchasing fixed assets, like real estate or equipment, with long-term, fixed-rate financing.

3. Bridge Loans

Short-term loans designed to "bridge the gap" while you secure long-term financing or complete renovations.

4. Hard Money Loans

Asset-based loans funded by private investors. These are fast, flexible, and ideal for investors who need quick access to capital—often used for fix-and-flip or value-add properties.

5. Commercial Construction Loans

Used for ground-up developments or major renovations, where funds are disbursed in phases.

6. CMBS Loans (Commercial Mortgage-Backed Securities)

Loans bundled and sold on the secondary market. These can offer competitive terms but are less flexible for borrowers.

Key Loan Terms to Know

• Loan-to-Value (LTV) Ratio: Most commercial lenders require a 65%–80% LTV.

• Debt Service Coverage Ratio (DSCR): Lenders look for a DSCR of 1.25 or higher, meaning the property generates 25% more income than needed to cover debt payments.

• Interest Rate: Based on creditworthiness, loan type, and market conditions.

• Amortization Period: Commercial loans often have 20–30 year amortization, with a shorter term (5–10 years) and balloon payment.

• Recourse vs. Non-Recourse: Some loans require personal guarantees (recourse), while others do not.

How to Qualify for a Commercial Real Estate Loan

Qualification varies by lender and loan type, but common requirements include:

• Solid business financials and credit history

• Strong personal credit score (for small business loans)

• Business plan and projections (for new properties)

• Property income potential (rent rolls, leases)

• Down payment (usually 20%-35%)

Lenders will closely review your cash flow, experience, and the property’s potential to generate income.

Tips for Getting Approved

1. Build a strong financial profile – Clean up credit, reduce debt, and organize financial statements.

2. Work with an experienced broker – A commercial loan broker can help you navigate options and find the best lender.

3. Prepare a professional loan package – Include all necessary documents, pro forma, rent roll, business plan, and property analysis.

4. Know your numbers – Be ready to discuss cap rates, DSCR, NOI, and market comps.

5. Have skin in the game – A higher down payment or equity stake increases your chances of approval.

   
   

   Why Choose Commercial Real Estate?

   • Higher income potential

   • Longer lease terms and lower vacancy

   • Diversification of tenant risk

   • Appreciation and tax benefits

   • Ability to scale portfolio faster

   
   

   Final Thoughts

   Commercial real estate loans are a powerful tool for investors, developers, and business owners. While they may be more complex than residential mortgages, the potential rewards are greater. By understanding the loan types, requirements, and approval process, you can position yourself for success and make smarter real estate investments.

   Looking to finance your next commercial deal? Connect with a trusted commercial loan broker to explore your options and find the right solution.

   
   

   Keywords to Include:

   • commercial real estate loans

   • CRE financing

   • commercial mortgage

   • SBA commercial loans

   • investment property loans

   • commercial loan broker

   
   

   📞 Call us today at [Your Number]🌐 Visit www.amerimort.com to get a free consultation.