BCG

Commercial Real Estate Loans

Finance the purchase, refinance, or development of commercial properties with long-term loans designed for business real estate investments. Build equity, control your business location, and benefit from property appreciation.

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$100K - $10M+
Typical Loan Range
5-25 Years
Loan Terms
20-35%
Down Payment
60-90 Days
Typical Timeline

What is Commercial Real Estate Financing?

Commercial real estate (CRE) loans are used to purchase, refinance, or develop income-producing or business-use properties. Unlike residential mortgages, CRE loans are secured by commercial properties and evaluated based on property income, business financials, and borrower creditworthiness.

These loans typically have terms of 5-25 years with amortization periods of 20-25 years. Many loans have balloon payments due after 5-10 years, requiring refinancing at that time. Interest rates may be fixed for the entire term or adjust after an initial fixed period.

Commercial real estate financing allows businesses to build equity, control their operating location, benefit from property appreciation, and gain tax advantages through depreciation and interest deductions.

Why Choose CRE Financing?

Build Equity
Monthly payments build ownership rather than paying rent to landlords
Property Appreciation
Benefit from property value increases over time
Tax Benefits
Deduct interest, depreciation, and operating expenses
Control & Stability
No landlord restrictions or rent increases
Additional Income
Lease excess space to generate rental income
Leverage Equity
Refinance to access equity for business growth

Property Types We Finance

Commercial real estate loans cover a wide range of property types for business use or investment.

Office Buildings

Single or multi-tenant office spaces for professional services, corporate headquarters, or medical offices.

Typical Range: $500K - $50M+

Retail Properties

Shopping centers, strip malls, standalone retail buildings, and mixed-use retail spaces.

Typical Range: $300K - $20M+

Multi-Family

Apartment buildings, condominiums, and residential complexes with 5 or more units.

Typical Range: $400K - $30M+

Industrial/Warehouse

Manufacturing facilities, distribution centers, warehouses, and flex spaces.

Typical Range: $500K - $40M+

Hospitality

Hotels, motels, resorts, and other lodging facilities for business or leisure travelers.

Typical Range: $1M - $100M+

Special Purpose

Churches, schools, gas stations, car washes, and other specialized commercial properties.

Typical Range: $250K - $10M+

Types of Commercial Real Estate Loans

Different loan structures for different commercial real estate needs.

Purchase Loans

Finance the acquisition of commercial property for owner-occupied business use or investment purposes.

65-80% LTV
20-35% down payment
5-25 year terms
Fixed or variable rates

Refinance Loans

Refinance existing commercial mortgages to lower rates, access equity, or improve loan terms.

Up to 75% LTV
Cash-out options
Rate and term refinance
Debt consolidation

Construction Loans

Short-term financing for ground-up construction or major renovation of commercial properties.

Interest-only payments
12-36 month terms
Draw schedules
Convert to permanent

Bridge Loans

Short-term financing to bridge gaps between property purchase and permanent financing or sale.

Fast approval
6-24 month terms
Higher rates
Flexible exit strategies

Qualification Requirements

Understanding what lenders look for in commercial real estate loan applications.

FactorTypical MinimumIdealNotes
Credit Score680+720+Personal and business credit reviewed
Down Payment20-35%25-30%Varies by property type and loan program
DSCR1.25x1.35x+Debt Service Coverage Ratio - property income vs. debt
Time in Business2+ years5+ yearsLonger history improves terms
Net WorthEqual to loan1.5x loanPersonal net worth requirement
Liquidity6-12 months12+ monthsReserves for property expenses

The Application Process

Step-by-step guide to securing commercial real estate financing.

1

Pre-Qualification

1-2 weeks

Submit initial application with business and property information. Lender reviews financials and provides preliminary terms.

Key Tips:
Prepare financial statements
Identify target property
Understand your budget
2

Property Identification

2-8 weeks

Find and negotiate purchase of commercial property. Execute purchase agreement or letter of intent.

Key Tips:
Work with commercial broker
Conduct initial due diligence
Negotiate favorable terms
3

Formal Application

1-2 weeks

Submit complete loan application with all required financial documents and property information.

Key Tips:
Gather all documentation
Provide detailed property info
Be responsive to requests
4

Property Due Diligence

3-6 weeks

Order and complete property appraisal, environmental report (Phase I), title search, and survey.

Key Tips:
Choose qualified vendors
Address issues promptly
Review reports carefully
5

Underwriting

4-8 weeks

Lender conducts comprehensive review of financials, property reports, and loan structure.

Key Tips:
Respond quickly to requests
Provide clarifications
Stay in communication
6

Closing

1-2 weeks

Final loan approval, document signing, and funding. Property ownership transfers to buyer.

Key Tips:
Review closing documents
Arrange insurance
Prepare for closing costs

Real Success Stories

See how businesses have used commercial real estate financing to grow and build wealth.

Medical Practice Expansion

Medical Office Building
Loan Amount
$2,500,000
Down Payment
25% ($625,000)

Purchased 12,000 sq ft medical office building, consolidated three locations into one, reduced rent by $8,000/month, building appreciated 18% in 3 years.

Multi-Family Investment

24-Unit Apartment Complex
Loan Amount
$3,200,000
Down Payment
30% ($960,000)

Acquired apartment building with 85% occupancy, increased rents 12%, improved to 95% occupancy, generates $15,000/month positive cash flow.

Manufacturing Facility

Industrial Warehouse
Loan Amount
$4,800,000
Down Payment
25% ($1,200,000)

Purchased 45,000 sq ft manufacturing facility, eliminated $25,000/month rent, expanded production capacity by 40%, property value increased 22%.

Retail Plaza Investment

Strip Mall
Loan Amount
$1,800,000
Down Payment
30% ($540,000)

Acquired 8-unit retail plaza with national tenants, 100% occupied with long-term leases, generates $12,000/month cash flow, refinanced after 3 years to access equity.

Pros & Cons

Understanding the advantages and considerations of commercial real estate financing.

Advantages

Build Equity & Wealth
Payments build ownership and property appreciation increases net worth
Tax Benefits
Deduct interest, depreciation, and operating expenses
Control & Stability
No landlord restrictions, rent increases, or lease expirations
Additional Income Potential
Lease excess space to generate rental income
Leverage for Growth
Refinance to access equity for business expansion
Long-Term Investment
Property typically appreciates over time, building long-term wealth

Considerations

Large Down Payment
Requires 20-35% down payment, tying up significant capital
Long-Term Commitment
5-25 year loans with balloon payments requiring refinancing
Property Maintenance
Responsible for all repairs, maintenance, and property expenses
Market Risk
Property values can decline during economic downturns
Less Flexibility
Harder to relocate or downsize compared to leasing
Complex Process
60-90 day process with extensive documentation and due diligence

Frequently Asked Questions

Common questions about commercial real estate financing

What is a commercial real estate loan?

A commercial real estate (CRE) loan is financing used to purchase, refinance, or develop income-producing or business-use properties. Unlike residential mortgages, CRE loans are secured by commercial properties and evaluated based on property income, business financials, and borrower creditworthiness. Terms typically range from 5-25 years with amortization periods of 20-25 years.

How much down payment is required for commercial real estate?

Commercial real estate loans typically require 20-35% down payment depending on property type, borrower strength, and loan program. Owner-occupied properties may qualify for lower down payments (10-15% with SBA 504 loans), while investment properties typically require 25-35% down. Stronger borrowers with excellent credit and financials may negotiate lower down payments.

What is Debt Service Coverage Ratio (DSCR) and why does it matter?

DSCR measures whether property income covers debt payments. It is calculated by dividing Net Operating Income (NOI) by annual debt service. Lenders typically require DSCR of 1.25-1.5x, meaning property income must exceed debt payments by 25-50%. For example, if annual debt payments are $100,000, NOI should be $125,000-$150,000. Higher DSCR indicates lower risk and may qualify for better terms.

How long does the commercial real estate loan process take?

Commercial real estate loans typically take 60-90 days from application to closing. The timeline includes pre-qualification (1-2 weeks), property identification (2-8 weeks if not already identified), formal application (1-2 weeks), property due diligence including appraisal and environmental reports (3-6 weeks), underwriting (4-8 weeks), and closing (1-2 weeks). Complex properties, environmental issues, or title problems may extend the timeline.

What are typical commercial real estate loan terms and rates?

Commercial real estate loans typically have terms of 5-25 years with amortization periods of 20-25 years. Many loans have balloon payments due after 5-10 years, requiring refinancing. Interest rates vary based on property type, borrower strength, and market conditions. Rates may be fixed for the entire term or adjust after an initial fixed period (e.g., 5-year fixed, then adjustable). Current rates typically range from 6-10% depending on these factors.

What is the difference between owner-occupied and investment property loans?

Owner-occupied properties are where your business operates (at least 51% of space), while investment properties are purchased solely for rental income. Owner-occupied loans typically offer lower down payments (15-25%), better rates, and more favorable terms because the business generates income to support payments. Investment property loans require higher down payments (25-35%) and stronger DSCR because they rely solely on rental income. SBA loans are only available for owner-occupied properties.

What documents are required for commercial real estate loans?

Required documents typically include: 2-3 years of business tax returns, 2-3 years of personal tax returns, business financial statements (profit & loss, balance sheet), personal financial statement, 6-12 months of business bank statements, property appraisal, environmental report (Phase I), title search and survey, lease agreements (for investment properties), purchase agreement or letter of intent, business plan (for development projects), and proof of insurance. Lenders may request additional documentation during underwriting.

Can I get a commercial real estate loan for a startup business?

Commercial real estate loans for startups are challenging but possible with strong personal financials, significant down payment (30-40%), and solid business plan. SBA 504 loans are more startup-friendly, requiring 10-15% down for owner-occupied properties. Lenders focus heavily on personal credit (720+), net worth, liquidity, and industry experience. Having an existing business with revenue history significantly improves approval odds and terms.

What are the tax benefits of commercial real estate ownership?

Commercial real estate offers several tax benefits: mortgage interest is tax-deductible, property depreciation provides annual deductions (typically 39 years for commercial buildings), operating expenses (maintenance, insurance, property taxes) are deductible, and 1031 exchanges allow deferring capital gains taxes when selling and purchasing replacement property. Owner-occupied properties may qualify for additional deductions. Consult with a tax professional to maximize benefits for your specific situation.

What happens if I default on a commercial real estate loan?

Defaulting on a commercial real estate loan can result in foreclosure, where the lender takes ownership of the property to recover the debt. This damages personal and business credit significantly (7-10 years), may result in deficiency judgments if property sale does not cover the debt, and can lead to personal liability if you provided a personal guarantee. If facing financial difficulties, contact your lender immediately to discuss workout options such as loan modification, forbearance, or deed-in-lieu of foreclosure to minimize damage.

Ready to Explore Commercial Real Estate Financing?

Complete our pre-qualification form to see what commercial real estate loan options may be available for your business.

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