Commercial real estate acquisition financing refers to the loan products and capital structures used to purchase income-producing commercial properties. Whether you are buying your first multifamily building, acquiring a retail center, or expanding a portfolio of industrial warehouses, the right financing structure can mean the difference between a profitable investment and a costly mistake.
The commercial lending market has rebounded significantly, with the CBRE Lending Momentum Index rising 112% year-over-year in Q3 2025, marking the highest lending activity since 2018 (source: CBRE). With the prime rate settling at 6.75% and lenders competing for quality deals, acquisition financing is more accessible today than at any point in the last three years.
This guide covers every major loan type for commercial property acquisitions, what lenders require to approve your deal, the step-by-step process from letter of intent to closing, and the most common mistakes that cost buyers money.
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What Are the Main Types of Commercial Acquisition Financing?
Six primary loan products dominate commercial real estate acquisition financing: conventional bank loans, SBA 7(a) and 504 loans, bridge loans, CMBS loans, and DSCR loans. Each product serves a different buyer profile and property situation. Choosing the wrong loan type is one of the most expensive mistakes acquisition buyers make.
Here is how each option works:
Conventional Bank Loans
Conventional commercial mortgages from banks and credit unions are the most common tool for stabilized property acquisitions. In 2026, expect LTVs of 65-75%, terms of 5-10 years with 20-25 year amortization, and rates from SOFR + 2.0% to 3.5% (approximately 6.0-7.5%).
Conventional loans close in 30-45 days and offer the most flexibility on property types. The trade-off is higher down payments (25-35%) and full recourse. For more details, visit our acquisition loans program page.
SBA 7(a) Loans
The SBA 7(a) program provides up to $5 million for owner-occupied acquisitions with down payments as low as 10-15%, terms up to 25 years, and flexible use of funds covering real estate, equipment, and working capital. Rates are variable, tied to WSJ Prime + 2.25% to 2.75%.
The SBA guarantee (up to 85%) makes approval possible for borrowers with less experience or lower credit scores (minimum 650). The trade-off is a longer closing timeline of 60-90 days.
SBA 504 Loans
The SBA 504 program splits funding between a conventional lender (50%), a Certified Development Company (40%), and the borrower (10%), creating the lowest down payment option for owner-occupied acquisitions. SBA 504 loans offer fixed rates (currently 6.5-7.5%), terms of 20-25 years, and fully amortizing payments with no balloon.
Bridge Loans
Bridge loans provide short-term capital for properties that do not yet qualify for permanent financing, including value-add acquisitions, distressed seller purchases, and deals requiring a quick close.
Bridge loans carry terms of 6-36 months with rates of 8-12%, but offer closings as fast as 2-3 weeks. Most bridge lenders focus on the property's after-renovation value rather than current cash flow.
CMBS Loans
CMBS loans are originated by lenders who package and sell the mortgages to bond investors. CMBS financing offers non-recourse terms, LTVs up to 75%, fixed rates for 5-10 year terms, and amortization up to 30 years.
The trade-off is less flexibility: prepayment penalties (defeasance or yield maintenance) and servicing by a special servicer. CMBS works best for acquisitions over $2 million on stabilized assets.
DSCR Loans
Debt service coverage ratio (DSCR) loans underwrite the property's income rather than the borrower's personal tax returns. This makes DSCR loans popular with real estate investors who may have complex tax situations or multiple properties that make traditional income documentation difficult.
DSCR loans offer LTVs up to 80%, terms from 5-30 years, and rates ranging from 7.0-9.5%. The minimum DSCR requirement is typically 1.20x. Use our DSCR calculator to check whether your target property qualifies.
How Much Down Payment Do You Need for a Commercial Acquisition?
Down payments for commercial real estate acquisitions typically range from 10% to 35% of the purchase price, depending on the loan type, property condition, and borrower strength. The average down payment across all commercial acquisition loans is approximately 20-25% (source: National Association of Realtors Commercial Division).
Here is what to expect by loan type:
- SBA 504 loans: 10-15% (lowest available)
- SBA 7(a) loans: 10-15%
- DSCR loans: 20-25%
- Conventional bank loans: 25-35%
- CMBS loans: 25-35%
- Bridge loans: 20-30%
Several factors push down payment requirements higher. Properties in secondary or tertiary markets, special-purpose buildings, hospitality assets, and deals with borrowers who have limited experience typically require 5-10% more equity. Conversely, multifamily properties in strong markets with experienced borrowers may qualify for the lowest available down payment.
For a detailed analysis of down payment structures, see our commercial loan down payment guide.
What Do Lenders Look for in a Commercial Acquisition Deal?
Commercial acquisition lenders evaluate five primary factors: property cash flow, borrower creditworthiness, collateral value, market fundamentals, and borrower experience. The weight assigned to each factor varies by loan type, but debt service coverage ratio is consistently the most important metric across all programs.
Debt Service Coverage Ratio (DSCR)
The DSCR measures whether the property generates enough income to cover its debt payments. Most lenders require a minimum DSCR of 1.20x to 1.35x for acquisition financing, meaning the property must produce at least 20-35% more net operating income than the annual debt service.
For example, a property with $500,000 in net operating income and $385,000 in annual debt payments has a DSCR of 1.30x, which would satisfy most lender requirements. Run your numbers through our DSCR calculator to see where your target property stands.
Loan-to-Value Ratio (LTV)
LTV measures how much you are borrowing relative to the property's appraised value. Maximum LTVs for acquisition loans range from 65% to 90% depending on the loan type and property class. Multifamily properties generally qualify for the highest LTVs, while special-purpose and hospitality assets face the most conservative limits.
Borrower Qualifications
Lenders assess credit score (typically 660-680+), net worth (often required to equal or exceed the loan amount), liquidity (6-12 months of debt service in reserves), and relevant real estate or business management experience.
Property and Market Analysis
Underwriters evaluate the physical condition of the property, local market vacancy rates, comparable sale and rental data, tenant credit quality, and remaining lease terms. Properties with long-term leases to creditworthy tenants in strong markets receive the most favorable financing terms.
Use our commercial mortgage calculator to model different acquisition scenarios and see how changes in interest rate, LTV, and amortization affect your monthly payment.
What Does the Acquisition Process Look Like from LOI to Closing?
The commercial real estate acquisition process typically takes 60-90 days from signed letter of intent to closing, though SBA-financed transactions may extend to 90-120 days. Understanding each phase helps you avoid delays that can jeopardize your deal.
Phase 1: Letter of Intent and Negotiation (Weeks 1-2)
The process begins when you submit a letter of intent (LOI) to the seller outlining your proposed purchase price, earnest money deposit, due diligence period, financing contingency, and closing timeline. The LOI is typically non-binding, but it establishes the framework for the purchase and sale agreement (PSA).
Key negotiation points include the length of the due diligence period (30-60 days is standard), the size of the earnest money deposit (1-3% of purchase price), and whether the deposit becomes non-refundable after due diligence expires.
Phase 2: Purchase and Sale Agreement (Weeks 2-3)
Once LOI terms are agreed upon, attorneys draft the binding purchase and sale agreement. This document specifies all material terms including purchase price, deposit structure, representations and warranties, contingencies, and the closing date. The earnest money is deposited into escrow upon PSA execution.
Phase 3: Due Diligence (Weeks 3-7)
Due diligence is the most critical phase of any commercial acquisition. During this period, you and your team verify every assumption about the property, its income, its condition, and its legal standing.
Key due diligence activities include property inspections and condition assessments, Phase I environmental site assessments, title search and survey review, rent roll verification and lease audits, operating expense analysis, zoning and land use confirmation, and insurance and property tax review.
For a comprehensive due diligence framework, see our CRE due diligence checklist for acquisitions.
Phase 4: Loan Application and Underwriting (Weeks 3-8)
Loan application typically runs in parallel with due diligence. Your lender will require a complete financial package including property financials (rent rolls, operating statements, tax returns), borrower financials (personal financial statement, tax returns, bank statements), a third-party appraisal, environmental reports, and a property condition report.
The lender's underwriting process takes 2-4 weeks for conventional and bridge loans, and 4-8 weeks for SBA and CMBS products. For guidance on what to expect in the lender's commitment, see our commercial loan term sheet guide.
Phase 5: Commitment and Pre-Closing (Weeks 8-10)
After underwriting approval, the lender issues a commitment letter detailing final loan terms, conditions to close, and any remaining requirements. You will need to clear all conditions, which may include additional documentation, insurance binders, entity formation, and legal review of loan documents.
Phase 6: Closing (Weeks 10-12)
At closing, you sign the mortgage documents, the lender funds the loan, and title transfers to you. Closing costs for commercial acquisitions typically range from 2-5% of the loan amount. For a complete breakdown of what to budget, see our commercial loan closing costs guide.
How Long Does It Take to Close an Acquisition Loan?
Closing timelines vary significantly by loan type. Bridge loans can close in as few as 14-21 days, making them ideal for competitive bidding situations. Conventional bank loans typically close in 30-45 days. CMBS and DSCR loans average 45-60 days. SBA 7(a) loans take 60-75 days, and SBA 504 loans can require 75-90 days due to the CDC approval process.
Several factors can extend your closing timeline. Incomplete documentation, environmental concerns requiring Phase II testing, complex title issues, tenant estoppel delays, and appraisal disputes are the most common causes of closing delays. The best way to avoid delays is to assemble your full financial package before making an offer and to work with an experienced commercial mortgage broker who can anticipate lender requirements.
How Does Property Type Affect Your Financing Options?
The type of commercial property you are acquiring has a direct impact on available loan programs, interest rates, LTV limits, and lender appetite. Multifamily properties receive the most favorable financing terms, while special-purpose and hospitality assets face the tightest restrictions.
Multifamily (5+ units): The preferred asset class for most lenders, qualifying for the highest LTVs (up to 80%), lowest rates (as low as 5.45% for agency loans), and the widest selection of programs including Fannie Mae, Freddie Mac, FHA, bank, and CMBS.
Industrial and warehouse: Strong lender appetite driven by e-commerce demand. Rates run 25-50 basis points higher than multifamily, with LTVs of 70-75%.
Office: Appetite varies by submarket and class. Class A in strong markets secures competitive terms, while suburban Class B/C faces tighter underwriting.
Retail: Grocery-anchored centers attract favorable financing. Non-essential retail faces rate premiums of 50-100 basis points.
Hospitality: The tightest requirements due to revenue volatility. Expect LTVs of 60-70% and rate premiums of 100-200 basis points.
For specialized property types, explore our permanent loan programs to see all available options.
What Are the Biggest Mistakes in Commercial Acquisition Financing?
The most expensive mistakes in commercial acquisition financing fall into three categories: underwriting errors, process failures, and structural missteps. Avoiding these pitfalls can save you hundreds of thousands of dollars over the life of your investment.
Underestimating Total Acquisition Costs
Buyers frequently focus on the purchase price while underestimating closing costs, immediate capital expenditures, and working capital needs. Closing costs alone run 2-5% of the loan amount, and many properties require immediate investment in deferred maintenance. Budget an additional 5-10% of the purchase price for these costs.
Overestimating Property Income
Relying on seller-provided pro forma income rather than verifying actual collections is a critical error. Always audit the rent roll against bank deposits, review lease terms for upcoming expirations or rent adjustments, and stress-test your underwriting against market vacancy rates. The gap between pro forma and actual income can easily exceed 10-15%.
Skipping Environmental Due Diligence
A Phase I Environmental Site Assessment costs $2,000-$5,000 and takes 2-3 weeks to complete. Skipping this step can expose you to environmental remediation costs of $50,000 to several million dollars. Every acquisition lender requires a Phase I, and discovering contamination after your due diligence period expires can be catastrophic.
Not Shopping Multiple Lenders
Commercial loan terms vary dramatically between lenders. Rate differences of 50-100 basis points are common on the same deal, and fee structures, prepayment penalties, and reserve requirements differ significantly. Working with a commercial mortgage broker like Clearhouse Lending gives you access to multiple lending sources so you can compare offers and negotiate the best terms.
Insufficient Cash Reserves
Lenders require 6-12 months of debt service in cash reserves at closing, but smart buyers maintain even larger cushions. Unexpected vacancies, capital repairs, and market downturns can strain cash flow quickly. Having 12-18 months of reserves provides a meaningful safety net.
Missing Due Diligence Deadlines
Once your due diligence period expires, your earnest money typically goes non-refundable. Delays in ordering inspections, environmental reports, or appraisals can leave you making a go/no-go decision without complete information. Start all third-party reports within the first week of the due diligence period.
Choosing the Wrong Loan Structure
Selecting a loan product that does not match your business plan is a structural error that compounds over time. For example, using a 5-year fixed-rate loan for a property you plan to renovate and sell in 18 months exposes you to unnecessary prepayment penalties. Matching loan structure to investment strategy is essential.
Contact our team to discuss your acquisition and get matched with the right financing structure for your investment strategy.
Frequently Asked Questions About Commercial Acquisition Financing
What credit score do I need to buy commercial real estate?
Most conventional commercial acquisition loans require a minimum credit score of 680. SBA loans may accept scores as low as 650 with compensating factors such as strong cash reserves or significant collateral. DSCR loans typically require 660+. Bridge loans have the most flexible credit requirements, with some lenders accepting scores in the 620 range for strong deals.
How much does it cost to close a commercial acquisition loan?
Closing costs for commercial acquisition financing typically range from 2-5% of the loan amount. Major cost components include lender origination fees (0.5-2.0%), appraisal and environmental reports ($5,000-$15,000), title insurance and escrow ($3,000-$15,000), legal fees ($5,000-$20,000), and recording and transfer taxes (varies by jurisdiction). For a detailed breakdown, see our commercial loan closing costs guide.
Can I buy commercial property with no money down?
True zero-down commercial acquisitions are rare, but several strategies can minimize your out-of-pocket equity. Seller financing for a portion of the purchase price, mezzanine or preferred equity from a capital partner, SBA loans with 10% down, and assuming an existing loan on the property are all approaches that reduce the cash equity required. Most lenders, however, want to see meaningful borrower equity of at least 10-15% to align incentives.
What is the difference between recourse and non-recourse acquisition loans?
A recourse loan holds the borrower personally liable for repayment if the property income is insufficient to cover debt service. A non-recourse loan limits the lender's recovery to the property itself, though standard "bad boy" carve-outs (fraud, environmental liability, bankruptcy filing) still create personal liability. CMBS and agency loans are typically non-recourse, while bank loans and SBA loans are usually full recourse.
How do I finance a commercial acquisition with no experience?
First-time commercial buyers can improve their chances of approval by partnering with an experienced co-sponsor or property manager, starting with multifamily (the most lender-friendly asset class), using SBA loans which are more flexible on experience requirements, preparing a detailed business plan and property analysis, and working with a commercial mortgage broker who can present your deal to the right lenders.
Should I use a bridge loan or permanent loan for my acquisition?
Use a bridge loan if the property needs renovation, has below-market occupancy, or requires a quick closing timeline. Use permanent financing if the property is stabilized with strong cash flow and you plan to hold it long-term. Many acquisitions use a bridge-to-permanent strategy where you close with bridge financing, complete your business plan, and then refinance into a permanent loan at better terms. Learn more about short-term options on our bridge loans page.
What is the minimum DSCR for a commercial acquisition loan?
Minimum DSCR requirements range from 1.0x for bridge loans to 1.35x for conservative conventional lenders. The most common threshold is 1.25x, meaning the property must generate $1.25 in net operating income for every $1.00 in annual debt service. Stronger DSCRs result in better rates and higher leverage. Use our DSCR calculator to model your deal.
How long does pre-approval take for a commercial acquisition loan?
Pre-qualification from a commercial lender typically takes 1-3 business days once you submit a complete financial package. A formal pre-approval or term sheet takes 1-2 weeks. Having your documentation organized before you start shopping for properties gives you a competitive advantage in bidding situations.
Ready to finance your next commercial real estate acquisition? Schedule a free consultation with our commercial lending advisors. We will review your deal, compare options across our lender network, and help you secure the best terms.
Clearhouse Lending is a commercial mortgage brokerage specializing in acquisition financing for all commercial property types. With access to conventional banks, SBA lenders, CMBS conduits, bridge lenders, and DSCR programs, we help buyers find the optimal loan structure for any acquisition. Get in touch today to discuss your next deal.