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  • Writer's picturePreston Morris

Your Commercial Real Estate Loan Guide

To qualify for a commercial real estate loan, your small business will usually be required to occupy at least 51% of the building. Otherwise, you should be applying for an investment property loan instead, which is appropriate for rental properties.

Learn how to qualify for a commercial real estate loan.

  • Most lenders require borrowers to have a credit score above 660 to qualify for a commercial real estate loan.

  • Commercial real estate loans can be term loans, SBA loans, lines of credit or portfolio loans.

  • Commercial real estate loans typically have five- to 10-year terms but are amortized over a term of up to 25 years, which may leave them with a large balloon payment at the end of the term.

  • This article is for business owners who need a commercial real estate loan to purchase a building or remodel an existing property for their business.

A commercial real estate loan is a type of financing that's used to buy property for business purposes. To get a commercial loan, you'll need to have good credit, make a down payment of 25% or more and plan to use a majority of the property being financed for your own business. Get To know more about us!

Which commercial real estate loan is right for your business? Here are a few tips that can help you choose the best commercial real estate loan for your needs and background:

Determine how quickly you need the funds. If you need fast funding — to compete with an all-cash buyer on a commercial piece of property, for instance — an SBA loan or traditional commercial mortgage loan may not work, as time to funding for these financing options can sometimes take months. An alternative commercial real estate loan that can be funded within a few days, like a commercial bridge loan, may be a better option.

Use your qualifications to narrow down your options. Your background and qualifications will narrow down the financing options you can realistically obtain. If you have good credit and your business has a high debt service coverage ratio, then you may qualify for a traditional commercial mortgage loan with favorable rates and longer terms. Bad credit applicants may find more success with a hard money lender with lenient requirements — just be mindful of high interest rates.

Shop around. Don’t take the first offer you’re given — shop around with different lenders to compare rates and terms. Many business owners start with lenders they already have relationships with, such as the institution where they do their business banking. Regional and local banks are another good starting point, since these institutions tend to better understand the local market. When applying, be wary when lenders make "soft" versus "hard" credit inquiries — the latter can harm your credit score.

Commercial Real Estate Loans

  • What is a Commercial Real Estate Loan?

  • Average Commercial Real Estate Loan Rates

  • How to Get a Commercial Mortgage

  • Best Commercial Real Estate Loans

  • How to Value Commercial Real Estate

Leasing Commercial Real Estate

  • Buying vs Leasing Real Estate

Other Financing Resources

  • Small Business Loan Comparison Tool

Residential Loans vs. Commercial Real Estate Loans: Key Differences

Commercial Real Estate Loans

  • Commercial real estate loans are usually made to business entities (corporations, developers, limited partnerships, funds and trusts).

  • Commercial loans typically range from five years or less to 20 years, with the amortization period often longer than the term of the loan.

  • Commercial loan loan-to-value ratios generally fall into the 65% to 80% range.

Residential Loans

  • Residential mortgages are typically made to individual borrowers.

  • Residential mortgages are an amortized loan in which the debt is repaid in regular installments over a period of time. The most popular residential mortgage product is the 30-year fixed-rate mortgage.

  • High loan-to-value ratios—even up to 100%—are allowed for certain residential mortgages, such as USDA or VA loans.

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