Types of Commercial Real Estate Lenders
Not all commercial lenders are created equal. Each type has different strengths, requirements, and ideal use cases.
1. Banks (Local, Regional, National)
Best For
- Borrowers with banking relationships
- Owner-occupied properties
- Smaller deals ($500K-$10M)
- Borrowers wanting flexible terms
Pros
- Relationship-based lending
- Flexible on terms and structure
- Can hold loans in portfolio
- May offer other banking services
Cons
- Often require full recourse
- May have prepayment penalties
- Credit quality requirements can be strict
- Limited by bank's geographic focus
Typical Terms
- Rates: Prime + 1-3% or fixed 6.5-8.5%
- LTV: 65-75%
- Term: 5-10 years
- Amortization: 20-25 years
2. Agency Lenders (Fannie Mae/Freddie Mac)
Best For
- Stabilized multifamily properties (5+ units)
- Strong borrowers with experience
- Long-term holds
- Borrowers wanting best rates
Pros
- Lowest rates in market
- Non-recourse available
- Up to 80% LTV
- 30-year fixed options
- Interest-only available
Cons
- Multifamily only
- Strict borrower requirements
- Property must be stabilized
- Expensive prepayment (yield maintenance/defeasance)
Typical Terms
- Rates: 5.5-7%
- LTV: Up to 80%
- Term: 5-30 years
- Amortization: 30 years
3. CMBS/Conduit Lenders
Best For
- All commercial property types
- Borrowers who don't meet agency requirements
- Larger deals ($2M+)
- Borrowers wanting non-recourse
Pros
- Non-recourse
- More flexible borrower requirements
- All property types eligible
- Large loans available
Cons
- Rigid servicing (no modifications)
- Defeasance required for prepayment
- Longer closing process
- Higher rates than agency
Typical Terms
- Rates: 6-8%
- LTV: Up to 75%
- Term: 5, 7, or 10 years
- Amortization: 25-30 years
4. Life Insurance Companies
Best For
- Trophy/Class A properties
- Very strong borrowers
- Large deals ($10M+)
- Long-term holds
Pros
- Very competitive rates
- Flexible terms
- Long-term relationships
- Can do very large deals
Cons
- Highly selective
- Long underwriting process
- Primarily core markets
- High borrower requirements
Typical Terms
- Rates: 5.25-7%
- LTV: 55-70%
- Term: 7-30 years
- Amortization: 25-30 years
5. SBA Lenders (504 and 7a)
Best For
- Owner-occupied properties
- Small businesses
- Lower down payment needs
- New business/building owners
Pros
- As little as 10% down (504)
- Competitive fixed rates
- Longer amortization
- Government guarantee
Cons
- Must be owner-occupied (51%+)
- SBA fees add to cost
- More documentation required
- Longer process
Typical Terms
- Rates: 6-7.5%
- LTV: Up to 90%
- Term: 10-25 years
- Amortization: 10-25 years
6. Bridge Lenders
Learn more about bridge loans → | Bridge Loan Calculator
Best For
- Value-add properties
- Quick closings needed
- Transitional situations
- Properties not ready for permanent debt
Pros
- Fast closing (5-21 days)
- Flexible underwriting
- Interest-only payments
- Future funding for improvements
Cons
- Higher rates (8-12%+)
- Short terms (12-36 months)
- Extension fees
- Must have exit strategy
Typical Terms
- Rates: 8-12%
- LTV: 65-80%
- Term: 12-36 months
- Interest-only
7. Hard Money Lenders
Learn more about hard money loans →
Best For
- Credit-challenged borrowers
- Urgent timelines
- Fix-and-flip projects
- Properties with issues
Pros
- Fastest closing (7-14 days)
- Asset-focused (less borrower scrutiny)
- Flexible on property condition
- Can close difficult deals
Cons
- Highest rates (10-14%+)
- High fees (2-4 points)
- Short terms
- Lower LTV
Typical Terms
- Rates: 10-14%
- LTV: 60-70%
- Term: 6-24 months
- Interest-only
8. Debt Funds
Best For
- Larger bridge/transitional loans
- Institutional borrowers
- Ground-up construction
- Complex capital stacks
Pros
- Larger loan amounts
- Flexible structures
- Professional institutional process
- Can be creative
Cons
- Higher minimums
- Sophisticated requirements
- Higher rates than traditional
- May require additional equity
How to Choose the Right Lender
Consider These Factors:
-
Property type and condition
- Stabilized? → Agency, CMBS, Life Co
- Value-add? → Bridge, Debt Fund
- Owner-occupied? → SBA, Bank
-
Timeline
- 45-60 days: Most permanent options
- 21-45 days: Bank, some Agency
- 5-21 days: Bridge, Hard Money
-
Borrower strength
- Strong financials → More options, better terms
- Weaker profile → CMBS, Bridge, Hard Money
-
Loan amount
- Under $1M: Bank, SBA, Hard Money
- $1-5M: Bank, SBA, CMBS, Bridge
- $5M+: All options
-
Hold period
- Long-term → Agency, Life Co, CMBS
- Short-term → Bridge, Bank
Why Work with a Broker?
A commercial mortgage broker provides:
- Access to multiple lender relationships
- Knowledge of current market conditions
- Ability to match deals to right lenders
- Negotiating leverage
- Guidance through the process
Let Us Match You with the Right Lender
With access to 6,000+ commercial lenders, we can find the right fit for your deal. Contact us for a free consultation and quote.
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