Commercial real estate investors often run into walls when trying to finance non-standard deals. The property might not fit agency guidelines. The borrower's income might be hard to verify through traditional channels. Or the deal itself might be too complex for a cookie-cutter loan program. That is where a commercial portfolio loan becomes the right tool for the job.
Portfolio loans give both lenders and borrowers room to negotiate terms that actually match the deal, rather than forcing every transaction through rigid underwriting boxes. For investors with unique properties or complex financial profiles, these loans can mean the difference between closing a deal and losing it.
With total commercial mortgage origination volume projected to reach $805 billion in 2026, according to the Mortgage Bankers Association, portfolio lending continues to play a critical role in the commercial real estate capital stack. Understanding how these loans work, and when they make sense, is essential for any serious CRE investor.
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What Is a Commercial Portfolio Loan?
A commercial portfolio loan is a mortgage that a lender originates and holds on its own balance sheet, rather than selling it on the secondary market to entities like Fannie Mae, Freddie Mac, or into a commercial mortgage-backed securities (CMBS) pool. Because the lender retains the loan, it assumes all the risk, and in return, it sets its own underwriting criteria, rates, and terms.
This is the core distinction. When a bank sells a loan to the secondary market, that loan must conform to specific guidelines set by the purchasing entity. Portfolio lenders skip that step entirely, which means they can approve deals that would be rejected under standardized programs.
Community banks, credit unions, and some regional banks are the most common portfolio lenders in the commercial space. According to the Mortgage Bankers Association, banks held the second-largest share of non-agency loan closings at 31% in Q3 2025, a sharp increase from 18% the prior year.
How Does Portfolio Lending Differ from Conventional Commercial Loans?
Conventional commercial loans, whether agency-backed, CMBS, or life company products, follow prescribed underwriting guidelines. These programs offer competitive rates and long terms, but they come with trade-offs: rigid borrower requirements, property type restrictions, and limited flexibility on deal structure.
Portfolio loans flip that equation. The lender evaluates each deal on its own merits and has full authority to adjust terms. Here is how the two approaches compare across key metrics.
The biggest practical difference comes down to negotiation. With a conventional commercial mortgage, the terms are largely set before you walk in the door. With a portfolio loan, the lender can adjust the LTV, amortization schedule, rate structure, and prepayment terms based on the strength of the borrower and the property.
For investors exploring different financing structures, our commercial mortgage calculator can help model payments across various rate and term scenarios.
Who Are the Typical Portfolio Lenders?
Portfolio lending is dominated by institutions that prioritize relationship banking and local market knowledge. The most common sources include:
- Community banks with strong ties to local commercial real estate markets
- Regional banks that maintain dedicated CRE lending divisions
- Credit unions offering commercial lending programs to their members
- Private lenders and debt funds focused on niche property types or borrower profiles
Larger national banks also maintain portfolio lending programs, but they tend to reserve them for high-net-worth clients or larger institutional deals. According to American Banker, the 20 largest bank CRE portfolios collectively hold hundreds of billions in commercial real estate debt on their balance sheets.
Community banks remain especially important. The Independent Community Bankers of America reported cautious optimism in their 2025 lending outlook, with many community banks expanding CRE portfolio lending as larger institutions pulled back.
What Types of Properties Work Best with Portfolio Loans?
Portfolio loans shine when the property does not fit neatly into standard lending categories. While conventional and agency loans work well for stabilized multifamily and standard commercial assets, portfolio lenders regularly finance:
- Mixed-use properties with unusual residential-to-commercial ratios
- Non-conforming multifamily buildings that fall outside agency size or condition requirements
- Special-purpose assets like self-storage facilities, mobile home parks, and car washes
- Value-add and transitional properties that need renovations before reaching stabilized occupancy
- Rural commercial properties in markets too small for CMBS or agency lenders
- Properties with environmental or structural issues that disqualify them from standardized programs
If you are working on a property that requires bridge financing before transitioning to permanent debt, a portfolio lender can often structure a single relationship that covers both phases of the project.
What Are the Typical Rates and Terms for Commercial Portfolio Loans?
As of early 2026, commercial portfolio loan rates generally fall between 5.50% and 9.00%, depending on the property type, borrower profile, and loan structure. That represents a premium of roughly 0.50 to 2.00 percentage points above comparable conventional commercial rates, according to current market data from Select Commercial.
Here is a breakdown of current rate ranges by loan type for context.
Typical portfolio loan terms include:
- Loan amounts: $500,000 to $25 million (varies by lender)
- LTV ratios: 65% to 80%, with most deals landing at 70% to 75%
- Amortization: 20 to 30 years
- Loan terms: 5 to 10 years, with balloon payment at maturity
- Prepayment penalties: Step-down structures (commonly 5-4-3-2-1) or percentage-based penalties, often waived in the final 90 days before maturity
- Recourse: Most portfolio loans are full recourse, meaning the borrower is personally liable
The recourse requirement is an important distinction. CMBS loans are typically non-recourse, which is one reason borrowers sometimes prefer them despite less flexible terms. Portfolio lenders generally require a personal guarantee, though some will negotiate partial recourse or "burn-off" provisions that reduce the guarantee as the loan pays down.
To estimate your monthly payments and see how different rates affect your cash flow, try the DSCR calculator to ensure your property meets the lender's coverage requirements.
How Do Portfolio Loans Compare to CMBS and Agency Financing?
Choosing between a portfolio loan, CMBS financing, and agency-backed debt depends on the specific deal. Each product has distinct advantages and limitations.
CMBS (Conduit) Loans are pooled and sold to investors as securities. They offer non-recourse terms and competitive rates starting around 5.18% as of February 2026, but they come with rigid underwriting, difficult prepayment provisions (defeasance or yield maintenance), and limited borrower-lender communication after closing. According to JPMorgan, CMBS loans are best suited for stabilized properties with strong cash flow.
Agency Loans from Fannie Mae and Freddie Mac focus primarily on multifamily properties. They offer some of the lowest rates in the market and terms up to 35 years, but they require significant borrower net worth (often 100% of the loan amount) and strict property condition standards.
Portfolio Loans fill the gap between these two extremes, offering relationship-based lending where terms can be tailored to the specific deal.
For a deeper dive into how different loan structures affect your investment returns, read our guide on DSCR loans vs. conventional mortgages for investors.
Ready to explore portfolio loan options for your next deal? Contact our team to discuss your specific situation and get matched with the right lender.
What Do Borrowers Need to Qualify for a Portfolio Loan?
Because portfolio lenders set their own underwriting standards, qualification requirements vary more than with standardized loan programs. However, most portfolio lenders evaluate deals using the following criteria.
Credit Score: Most portfolio lenders want to see a minimum credit score of 650, though some will go as low as 620 for strong deals. Unlike conventional programs, portfolio lenders weigh credit score as just one factor among many, rather than a hard pass-fail threshold.
Net Worth and Liquidity: Borrowers typically need a net worth at least equal to the loan amount and liquid reserves covering 6 to 12 months of debt service payments.
Experience: Lenders prefer borrowers with a track record of owning and managing commercial real estate. First-time investors may still qualify, but they should expect higher scrutiny and potentially less favorable terms.
Property Cash Flow: The property's debt service coverage ratio (DSCR) is critical. Most portfolio lenders require a minimum DSCR of 1.20x to 1.30x, meaning the property's net operating income must exceed the annual debt service by 20% to 30%.
Income Verification: One of the biggest advantages of portfolio lending is flexible income documentation. Borrowers can often qualify using bank statements, 1099 forms, profit-and-loss statements, or even asset-based underwriting rather than traditional W-2 documentation. This makes portfolio loans particularly attractive for self-employed investors and business owners.
When Is a Portfolio Loan the Best Choice?
Portfolio loans are not always the cheapest option, but they are often the only option, or the best fit, in several common scenarios.
Scenario 1: Non-Conforming Properties. If your property does not meet agency or CMBS standards due to its type, condition, size, or location, a portfolio lender can evaluate it on its actual cash flow and market position rather than checking boxes on a standardized form.
Scenario 2: Complex Borrower Profiles. Self-employed borrowers, foreign nationals, investors with past credit events (bankruptcies, foreclosures, short sales), and those with non-traditional income sources often find portfolio lenders more receptive than conventional programs.
Scenario 3: Multiple Properties Under One Loan. Investors who own several commercial properties can consolidate them under a single portfolio loan, known as a blanket mortgage. This simplifies management and can improve overall terms. For more on this strategy, see our guide on financing multiple commercial properties.
Scenario 4: Speed and Flexibility. Portfolio lenders can often close faster than CMBS or agency programs because they do not need external approvals. If you are in a competitive bidding situation, the speed advantage can be decisive.
Scenario 5: Transitional or Value-Add Deals. Properties undergoing renovations, lease-up, or repositioning may not qualify for permanent financing yet. A portfolio lender can provide interim financing with a clear path to permanent loans once the property stabilizes.
If your deal does not fit the standard mold, a portfolio loan may be exactly what you need. Reach out to our commercial lending advisors to discuss your options.
What Are the Risks and Drawbacks of Portfolio Loans?
Portfolio loans offer valuable flexibility, but borrowers should understand the trade-offs before committing.
Higher Interest Rates. Because the lender retains all the risk, portfolio loan rates carry a premium over conventional or agency financing. Over the life of a loan, that premium adds up to significant additional interest expense.
Shorter Loan Terms. Most portfolio loans have terms of 5 to 10 years with a balloon payment at maturity. That creates refinancing risk, especially in a rising rate environment. With roughly $544 billion in commercial loans maturing in 2025 alone, according to Investingincre.com, balloon payment risk is a real concern for many CRE investors.
Full Recourse. Unlike CMBS loans, most portfolio loans require a personal guarantee. If the property underperforms and you cannot cover the debt, the lender can pursue your personal assets.
Lender Relationship Risk. If your portfolio lender is acquired, changes its lending appetite, or exits the CRE market, your refinancing options at maturity could be limited. This is especially relevant for community banks facing regulatory pressure on CRE concentration.
Less Standardization. The flexibility that makes portfolio loans attractive also means less predictability. Terms can vary widely between lenders, making it essential to compare multiple offers.
How Can Borrowers Get the Best Terms on a Portfolio Loan?
Securing favorable portfolio loan terms requires preparation and strategy. Here are the most effective approaches.
Build Lender Relationships Early. Portfolio lending is relationship-driven. Maintaining deposit accounts and an active banking relationship with your lender before requesting a loan can lead to better rates and faster approvals.
Present a Strong Package. Even though portfolio lenders are flexible, they still want to see a well-organized loan request. Include a detailed property analysis, borrower financial statements, a clear business plan, and realistic cash flow projections.
Shop Multiple Lenders. Because terms vary so widely, getting quotes from at least three to five portfolio lenders is essential. Community banks, credit unions, and regional banks may all offer meaningfully different terms for the same deal.
Negotiate Prepayment Terms. Prepayment penalties are one of the most negotiable aspects of portfolio loans. Push for step-down structures rather than flat penalties, and try to include a window for penalty-free prepayment before maturity.
Offer Additional Deposits or Business. Portfolio lenders value the overall banking relationship. Offering to move deposit accounts, treasury management, or other business banking to the lender can unlock better pricing.
Reduce the Ask. A lower LTV ratio, larger cash reserves, or additional collateral can all reduce the lender's risk and lead to better terms. Coming in at 65% LTV instead of 75% LTV can make a meaningful difference in rate and structure.
Whether you are financing your first commercial property or expanding an existing portfolio, the right loan structure matters. Connect with our team to get a personalized analysis of your best financing options.
What Are the Most Common Questions About Portfolio Loans?
What is the minimum loan amount for a commercial portfolio loan?
Most portfolio lenders set minimum loan amounts between $250,000 and $1 million, depending on the institution. Community banks sometimes go lower for local borrowers with existing relationships, while larger regional banks may start at $1 million or higher.
Can I get a portfolio loan with a low credit score?
Yes, some portfolio lenders will work with credit scores as low as 620. However, lower credit scores typically result in higher interest rates, lower LTV limits, and additional requirements like larger reserves or additional collateral. A strong property with solid cash flow can help offset a lower credit score.
Are portfolio loans available for all commercial property types?
Portfolio lenders finance a wide range of property types, including multifamily, retail, office, industrial, mixed-use, self-storage, mobile home parks, and special-purpose properties. The specific property types available depend on the individual lender's appetite and expertise.
How long does it take to close a commercial portfolio loan?
Portfolio loans can typically close in 30 to 60 days, which is faster than CMBS loans (60 to 90 days) and comparable to or faster than agency programs. The timeline depends on appraisal, environmental review, and the complexity of the borrower's financial profile.
What happens when my portfolio loan matures?
At maturity, you will need to either pay off the remaining balance (the balloon payment), refinance into a new loan, or sell the property. Most borrowers refinance, either with the same portfolio lender or by transitioning to a conventional or agency loan if the property has stabilized enough to qualify.
Can I use a portfolio loan to finance multiple properties?
Yes, blanket portfolio loans allow you to finance multiple commercial properties under a single loan. This can simplify management, reduce closing costs, and sometimes improve overall terms by cross-collateralizing the properties.
Do portfolio loans require a personal guarantee?
Most portfolio loans are full recourse, meaning a personal guarantee is required. Some lenders offer partial recourse structures or "burn-off" provisions where the guarantee reduces as the loan pays down, but fully non-recourse portfolio loans are uncommon.
Sources: Mortgage Bankers Association, Select Commercial, JPMorgan CRE Insights, CMBS.Loans, Bankrate, Investingincre.com, Independent Community Bankers of America