Commercial Real Estate Financing
Own Property.
Build Equity.
Acquire, refinance, or develop at 65–90% LTV, terms up to 25 years — For conventional CRE, SBA 504, bridge, and construction. Starting at $500K.
The Basics
What Is Commercial Real Estate Financing?
Commercial real estate financing refers to loans secured by income-producing or owner-occupied commercial properties — including office buildings, retail centers, warehouses, apartment complexes with 5+ units, and hotels. Unlike residential mortgages, CRE loans are underwritten primarily on the property’s income potential, measured by Debt Service Coverage Ratio (DSCR), rather than the borrower’s personal income alone.
Most conventional CRE loans feature 5–10 year fixed-rate terms with 20–30 year amortization and a balloon payment at maturity, requiring refinancing or payoff. Programs range from government-backed SBA 504 loans (up to 90% LTC for owner-occupied) to conventional bank mortgages, CMBS securitizations, and short-term bridge loans for transitional assets.
The Process
How CRE Financing Works
From property identification to funded loan — the 5-step CRE process.
Property Evaluation
Identify a target property and assess income potential, occupancy, location, and market value.
Application & Docs
Submit operating statements, rent roll, tax returns, SREO, and entity documents.
Underwriting & Due Diligence
Lender orders MAI appraisal, Phase I environmental, and analyzes DSCR, debt yield, and tenant quality.
Loan Commitment
Receive commitment letter with amount, rate, term, amortization, prepayment structure, and closing conditions.
Closing & Funding
Sign documents, satisfy conditions, complete the property transfer. Loan funds disbursed.
Compare Options
CRE Loan Types Compared
How conventional CRE mortgages stack up against SBA 504, bridge, and hard money options.
| Factor | Conventional CRE | SBA 504 | Bridge Loan | Hard Money |
|---|---|---|---|---|
| LTV ratio | 65–75% | Up to 90% LTC | 65–80% | ~65% |
| Loan term | 5–10 yr balloon | 20–25 years | 12–36 months | 6–24 months |
| Amortization | 20–30 years | 25 years | Interest only | Interest only |
| Typical rate | 6.0–7.5% | 5.6–6.5% | 7–12% | 10–13%+ |
| Time to close | 45–90 days | 60–120 days | 2–4 weeks | 1–2 weeks |
| Min credit score | 680+ | 660+ | 620–650+ | None (asset) |
| Personal guarantee | Usually yes | Required | Usually yes | Sometimes |
| Prepayment penalty | Step-down | Declining | Minimal | Rarely |
| Best for | Stabilized assets | Owner-occ. (51%+) | Value-add | Distressed / fast close |
Rates and terms are representative and subject to underwriting. Pezzula sources from a network of bank, SBA, CMBS, and bridge lenders.
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Our CRE specialists match your property and business profile to the right lender — bank, SBA, CMBS, or bridge — with one application.
Get a Free CRE QuoteLoan Structures
Types of Commercial Real Estate Financing
Different structures for different property types and investment strategies.
Conventional CRE Mortgage
Fixed or variable rate financing for stabilized income-producing properties. 5–10 year terms with 20–30 year amortization and a balloon payment at maturity.
Best for: Investors and businesses acquiring or refinancing stabilized commercial properties with a proven income history.
SBA 504 Loan
Government-backed program combining a bank first mortgage with a CDC/SBA second. Up to 90% LTC, below-market fixed rates, and 20–25 year terms with no balloon on the SBA portion.
Best for: Small businesses purchasing or constructing owner-occupied CRE where the business will occupy at least 51% of the space.
Bridge Loan
Short-term financing (12–36 months, interest-only) for acquisitions requiring renovation, lease-up, or repositioning before qualifying for permanent financing.
Best for: Value-add investors acquiring below-stabilization properties with a clear plan to reposition and refinance into long-term debt.
Construction Loan
Financing for ground-up development or major renovation. Funds disbursed on a draw schedule tied to construction milestones, then converted to permanent financing at completion.
Best for: Developers undertaking new construction with a clear stabilization path and a take-out financing commitment in place.
Pros & Cons
Benefits & Considerations
Benefits
- Build equity instead of paying rent — converts occupancy cost to an appreciating asset
- Long amortization (20–30 years) keeps monthly payments lower than most business loan terms
- Rental income from tenants can partially or fully offset your debt service
- Property appreciation creates wealth independent of your business performance
- SBA 504 allows purchase with as little as 10% down for owner-occupied CRE
- Full control over your operating space — no lease renewal risk or landlord restrictions
Considerations
- Higher rates and fees than residential mortgages — CRE is a higher-risk category for lenders
- 25–35% down required for investment properties; SBA 504 reduces this to 10–15% for owner-occupants
- Closing timelines of 45–90 days for conventional; 60–120 days for SBA — plan well ahead
- Balloon payment risk — most CRE mortgages require refinancing or payoff after 5–10 years
- Personal guarantee typically required on recourse loans — your personal assets are at risk
- Complex due diligence — MAI appraisal, Phase I environmental, rent rolls, and entity docs all required
Real-World Example
Medical Office: Leasing vs. Owning
A growing medical practice paying $15,000/month in rent evaluates purchasing a $2M medical office building via SBA 504 with 15% down.
| Item | Continue Leasing | Purchase (SBA 504) |
|---|---|---|
| Purchase price | — | $2,000,000 |
| Down payment (SBA 504 — 15%) | — | $300,000 |
| Total loan amount | — | $1,700,000 |
| Combined monthly payment | — | $10,720 |
| Tenant rental income (40% of bldg) | — | −$8,333/mo |
| Property taxes & insurance (est.) | — | +$5,000/mo |
| Net effective monthly cost | $15,000 | $7,387 |
| Equity built (year 1) | $0 | ~$42,000 |
By purchasing, the practice cuts its effective monthly cost from $15,000 to $7,387 — saving $91,356/year — while building ~$42,000 in equity in year one and generating income from tenant rents.
Industry Use Cases
Who Uses CRE Financing?
Medical & Professional Offices
Practices and professional firms convert lease payments to equity via SBA 504, gaining full space control and eliminating landlord-imposed renewal risk.
Explore SBA 504Retail & Hospitality
Retailers and hotel operators buy their locations to build equity, lock in occupancy costs, and control renovation and expansion decisions.
Explore Lines of CreditIndustrial & Warehouse
Manufacturers and distributors acquire warehouse and production facilities, often pairing CRE financing with equipment loans for a complete capital stack.
Explore Equipment FinancingReal Estate Investors
Multi-family and mixed-use investors use conventional CRE mortgages to acquire income-producing portfolios, qualifying on property DSCR and rent rolls rather than personal income.
Explore Asset-Based LendingFAQ
Frequently Asked Questions
Common questions about CRE financing, underwriting, and loan structures.
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Get a personalized CRE quote and find out whether conventional, SBA 504, bridge, or construction financing fits your property and goals.