A commercial real estate loan is one of the most powerful tools for building wealth through property investment. Whether you are acquiring your first multifamily building, expanding your retail portfolio, or refinancing to access equity, understanding how these loans work is essential to getting the best terms and avoiding costly mistakes.
This comprehensive guide covers everything you need to know about commercial real estate financing in 2026, including loan types, current rates, qualification requirements, and how to choose the right financing for your investment strategy.
Commercial Real Estate Loan Overview
$500K-$50M+
Loan Range
5-25 years
Term Length
15-35%
Down Payment
6.5-15%
Rates
What Is a Commercial Real Estate Loan?
A commercial real estate loan is financing used to purchase, refinance, or renovate income-producing properties. Unlike residential mortgages for single-family homes, commercial loans are designed for properties that generate rental income or serve business purposes.
The key distinction is how lenders evaluate these loans. While residential lenders focus primarily on your personal income and credit score, commercial lenders prioritize the property's ability to generate sufficient income to cover the debt payments. This is measured through the Debt Service Coverage Ratio (DSCR).
Commercial real estate loans typically range from $500,000 to $50 million or more, with terms between 5 and 25 years. Interest rates vary significantly based on loan type, property type, borrower qualifications, and market conditions.
The commercial lending market offers more flexibility than residential financing. Borrowers can often negotiate terms, structure deals creatively, and access non-recourse options that protect personal assets. However, this flexibility comes with more complexity, which is why working with an experienced commercial lender is valuable.
What Types of Commercial Real Estate Loans Are Available?
Choosing the right loan type is one of the most important decisions in commercial real estate investing. Each option has distinct advantages, and the best choice depends on your property type, investment timeline, and financial situation.
Commercial Real Estate Loan Types Comparison
| Loan Type | Best For | Rate Range | Term | LTV |
|---|---|---|---|---|
| Conventional | Stabilized properties | 6.75% - 8.5% | 5-25 years | 65% - 80% |
| SBA 504 | Owner-occupied | 6.5% - 7.5% | 10-25 years | Up to 90% |
| SBA 7(a) | Mixed-use properties | 8% - 8.75% | Up to 25 years | Up to 90% |
| Bridge Loan | Value-add deals | 9% - 12% | 6-36 months | Up to 75% |
| DSCR Loan | Investment properties | 7.5% - 9.5% | 5-30 years | Up to 80% |
| Hard Money | Fix-and-flip | 10% - 15% | 6-24 months | Up to 70% |
Conventional Commercial Loans
Conventional loans from banks, credit unions, and institutional lenders offer the most competitive rates for qualified borrowers and stabilized properties. These loans typically require strong credit (680+), proven property income, and a meaningful down payment.
The advantages include lower interest rates (currently 6.75% to 8.5%), longer fixed-rate periods, and higher loan amounts. The trade-off is stricter qualification requirements and longer closing timelines of 45 to 60 days.
Conventional loans work best for experienced investors with strong financials who are acquiring or refinancing stabilized, cash-flowing properties. If you have the qualifications, this should typically be your first choice for the lowest cost of capital.
SBA Loans (504 and 7a)
The Small Business Administration offers two programs that can be excellent for commercial property purchases. SBA 504 loans provide up to 90% financing with below-market rates for owner-occupied properties. SBA 7(a) loans offer more flexibility for mixed-use properties and can include working capital.
SBA loans feature the highest leverage available in commercial lending, making them ideal for business owners who want to own their real estate rather than lease. The catch is that you must occupy at least 51% of the property, and the approval process takes longer at 60 to 120 days.
Bridge Loans
Bridge loans are short-term financing of 6 to 36 months designed for transitional situations. Common uses include acquiring properties that need renovation, covering the gap between purchase and permanent financing, or moving quickly on time-sensitive opportunities.
Rates are higher at 9% to 12% because these loans carry more risk. However, bridge lenders offer speed and flexibility that traditional lenders cannot match. A good bridge lender can close in 2 to 4 weeks with less documentation than conventional financing requires.
DSCR Loans
DSCR loans qualify borrowers based on property income rather than personal income. This makes them popular with self-employed investors, those with complex tax returns, or investors who own multiple properties.
The key advantage is simplified qualification. Lenders focus on whether the property's rental income covers the mortgage payment, typically requiring a DSCR of 1.0x to 1.25x. You do not need to provide tax returns or verify personal income.
DSCR loans work well for investors building portfolios or those whose personal income does not reflect their true financial strength.
Hard Money Loans
Hard money loans are asset-based financing from private lenders. Qualification depends almost entirely on the property's value and the borrower's equity, not credit scores or income verification.
These loans are expensive at 10% to 15% interest plus points but serve an important role. They enable deals that would not qualify for other financing, such as heavily distressed properties or borrowers with credit challenges. Speed is another advantage, with closings possible in 7 to 14 days.
Hard money should be a last resort for most investors due to the cost, but it can be the right tool for fix-and-flip projects or situations where speed matters more than rate.
Best Use Cases by Loan Type
Conventional
- Lowest rates 6.75-8.5%
- Longest terms up to 25 years
- Best for stabilized assets
- Stricter qualification
- 45-60 day closing
SBA Loans
- 90% financing available
- Below-market rates
- Great for owner-occupants
- 51% occupancy required
- 60-120 day process
Bridge Loans
- Close in 2-4 weeks
- Flexible underwriting
- Value-add friendly
- Higher rates 9-12%
- Short 6-36 month terms
Ready to explore your options? Our team can help you identify the best loan type for your specific situation. Contact us for a free consultation and get pre-qualified in 24 hours.
What Are the Requirements for a Commercial Real Estate Loan?
Qualification requirements vary significantly by loan type. Understanding what lenders look for helps you prepare a stronger application and set realistic expectations.
Qualification Requirements by Loan Type
| Requirement | Conventional | SBA | Bridge | DSCR | Hard Money |
|---|---|---|---|---|---|
| Min Credit Score | 680+ | 650+ | 620+ | 660+ | 550+ |
| DSCR Requirement | 1.25x+ | 1.15x+ | 1.0x+ | 1.0x+ | N/A |
| Experience | Preferred | Not required | Preferred | Not required | Not required |
| Personal Guarantee | Usually | Required | Sometimes | Usually not | Usually |
| Tax Returns | 2-3 years | 3 years | Sometimes | Not required | Not required |
Credit Score Requirements
Credit scores matter in commercial lending, though less than in residential financing. Conventional lenders typically want 680+ scores, while bridge and hard money lenders may work with scores as low as 550 to 620.
Your credit score affects not just approval odds but also your interest rate. A borrower with a 750 score might save 0.5% to 1.0% compared to someone at 680. Over a $2 million loan, that difference equals $10,000 to $20,000 annually.
Debt Service Coverage Ratio (DSCR)
DSCR measures whether the property generates enough income to cover the mortgage payment. Lenders calculate this by dividing Net Operating Income (NOI) by annual debt service.
Most conventional lenders require a DSCR of 1.25x or higher, meaning the property produces 25% more income than needed for the mortgage. SBA loans may accept 1.15x, while bridge loans can work with 1.0x or even below if there is a clear path to stabilization.
If your property's DSCR is too low, you have options: increase the down payment, negotiate a lower purchase price, or demonstrate how you will improve income after closing.
Down Payment and Equity
Expect to bring 15% to 35% down for most commercial loans. The exact requirement depends on property type, loan program, and your qualifications.
SBA loans offer the highest leverage at 90% LTV (10% down) for owner-occupied properties. Conventional loans typically range from 65% to 80% LTV. Bridge and hard money loans usually cap at 70% to 75% LTV to protect the lender in case of default.
Experience and Track Record
Lenders prefer borrowers with commercial real estate experience, though it is not always required. First-time investors may face higher rates or need to bring on an experienced partner.
Your experience matters most for complex projects like ground-up construction or heavy value-add renovations. For stabilized acquisitions, lenders focus more on the property fundamentals and your overall financial strength.
Personal Guarantee vs. Non-Recourse
Most commercial loans require a personal guarantee, meaning you are personally liable if the property cannot cover the debt. However, non-recourse options exist, particularly with DSCR loans and some conventional programs.
Non-recourse loans protect your personal assets but typically come with slightly higher rates and stricter underwriting. They make sense for investors with substantial net worth who want to limit liability exposure.
What Are Current Commercial Real Estate Loan Rates in 2026?
Interest rates for commercial real estate loans in 2026 range from approximately 6.5% to 15%, depending on loan type, property characteristics, and borrower qualifications.
2026 Commercial Real Estate Loan Rate Ranges
6.5-7.5%
SBA 504
6.75-8.5%
Conventional
7.5-9.5%
DSCR
9-12%
Bridge
Current Rate Ranges by Loan Type
As of early 2026, here are typical rate ranges:
SBA 504: 6.5% to 7.5% tied to Treasury rates
Conventional: 6.75% to 8.5%
SBA 7(a): Prime plus 2.25% to 2.75%, currently 8% to 8.75%
DSCR: 7.5% to 9.5%
Bridge: 9% to 12%
Hard Money: 10% to 15%
These ranges are starting points. Your actual rate depends on multiple factors that you can influence.
Factors That Affect Your Commercial Loan Rate
| Factor | Lower Rate Impact | Higher Rate Impact |
|---|---|---|
| Credit Score | 720+ score | Below 680 |
| DSCR | 1.35x or higher | Below 1.20x |
| LTV Ratio | Below 65% | Above 75% |
| Property Type | Multifamily, industrial | Hotel, restaurant |
| Market Location | Primary markets | Tertiary markets |
| Experience | 10+ deals completed | First-time investor |
How to Get the Best Rate
Several factors within your control affect the rate you receive:
Improve your DSCR. A property with 1.35x coverage gets better rates than one at 1.20x. If possible, negotiate higher rents or a lower purchase price.
Put more down. Higher equity means lower risk for the lender and better pricing for you. A 35% down payment typically beats 25% by 0.25% to 0.50%.
Choose the right property type. Multifamily and industrial properties get the best rates. Hotels and restaurants face premium pricing.
Shop multiple lenders. Rate quotes vary significantly between lenders. Getting 3 to 5 quotes can save thousands annually. We work with a network of capital sources to find the best terms for each deal.
Lock at the right time. Interest rates fluctuate daily. Work with your lender to lock your rate when pricing is favorable, typically after receiving full approval.
How Much Can You Borrow with a Commercial Real Estate Loan?
Your maximum loan amount depends on two main factors: the property value (determining LTV) and the property income (determining DSCR). The more restrictive of these two calculations sets your limit.
Maximum LTV by Property Type
80%
Multifamily
75%
Industrial
75%
Retail
70%
Office
65%
Hotel
Loan-to-Value Limits
LTV limits vary by property type because some assets carry more risk than others. Multifamily properties can achieve up to 80% LTV because they have stable demand and predictable income. Hotels might max out at 65% LTV due to revenue volatility.
For a $5 million multifamily property at 75% LTV, the maximum loan would be $3.75 million. For a $5 million hotel at 65% LTV, the limit drops to $3.25 million.
DSCR Constraints
Even if LTV allows a certain loan amount, the property must generate enough income to support it. If a property produces $400,000 in NOI and the lender requires 1.25x DSCR, maximum annual debt service is $320,000. At current rates, that might support a loan of $4 million.
Both constraints must be satisfied. Lenders will fund the lower of the LTV-based or DSCR-based maximum.
Increasing Your Borrowing Power
To maximize your loan amount:
Demonstrate upside in rents by providing market rent comparables
Show expense reduction opportunities with a detailed operating plan
Bring in equity partners to increase your down payment capacity
Consider mezzanine or preferred equity to fill gaps
Talk to our team about structuring your capital stack to meet your acquisition goals.
What Properties Qualify for Commercial Real Estate Financing?
Almost any income-producing property can qualify for commercial financing, though terms vary significantly by property type.
Property Types and Financing Options
| Property Type | Available Loan Types | Typical LTV | Key Considerations |
|---|---|---|---|
| Multifamily 5+ units | All types | Up to 80% | Most favorable terms |
| Office | Conventional, SBA, Bridge | Up to 75% | Tenant quality matters |
| Retail | Conventional, SBA, Bridge | Up to 75% | Anchor tenant critical |
| Industrial | Conventional, SBA, DSCR | Up to 75% | Strong sector |
| Self-Storage | Conventional, SBA, DSCR | Up to 75% | Experience valued |
| Hotel | SBA, Bridge, Conventional | Up to 65% | Higher scrutiny |
Most Favorable Property Types
Multifamily (5+ units): The most favored property type in commercial lending. Strong demand, consistent income, and liquid resale markets make apartments attractive to lenders. Expect the best rates and highest leverage.
Industrial and Warehouse: Strong sector fundamentals from e-commerce growth make industrial properties popular with lenders. Low vacancy and stable tenants lead to favorable terms.
Self-Storage: Proven recession resistance and manageable operations make self-storage an attractive asset class. Experience in the sector helps with qualification.
More Challenging Property Types
Retail: Lender appetite depends heavily on tenant mix. Grocery-anchored centers with national tenants get good terms. Older strip centers with local tenants face more scrutiny.
Office: The post-pandemic office market has made lenders cautious. Strong buildings with long-term leases still get financed, but underwriting is stricter than pre-2020.
Hospitality: Hotels face the most challenging financing environment due to revenue volatility. Expect lower leverage, higher rates, and more detailed underwriting.
Special Situations
Mixed-use properties, ground-up construction, and special-purpose buildings each have unique financing considerations. Our team specializes in creative solutions for complex deals that do not fit standard programs.
How Long Does It Take to Get a Commercial Real Estate Loan?
Timeline expectations should inform your purchase contracts and deal negotiations. Underestimating closing time is one of the most common mistakes in commercial real estate.
Commercial Loan Timeline by Type
Hard Money
Close in 7-14 days
Bridge Loan
Close in 2-4 weeks
DSCR
Close in 3-5 weeks
Conventional
Close in 45-60 days
SBA 7(a)
Close in 60-90 days
SBA 504
Close in 75-120 days
Fastest Options
Hard money loans can close in 7 to 14 days when necessary. Bridge loans typically take 2 to 4 weeks. These options exist specifically for time-sensitive deals where speed justifies the higher cost.
Standard Timelines
DSCR loans typically close in 3 to 5 weeks, and conventional bank loans take 45 to 60 days. Build this timeline into your purchase contract with appropriate contingency periods.
SBA Loan Timelines
SBA loans take the longest, typically 60 to 120 days from application to closing. The multi-party approval process involving the bank, SBA, and CDC for 504 loans requires patience. Start early and maintain consistent communication with all parties.
Accelerating Your Timeline
To close faster:
Prepare complete documentation before applying
Respond to lender requests within 24 hours
Order appraisal and environmental reports immediately
Keep your attorney and title company informed throughout
Work with an experienced lender who knows how to push deals through
What Documents Do You Need for a Commercial Real Estate Loan?
Documentation requirements vary by loan type. Gathering materials before you apply prevents delays and demonstrates professionalism to lenders.
Required Documentation Checklist
| Document | Conventional/SBA | Bridge/Hard Money | DSCR |
|---|---|---|---|
| Personal Tax Returns | Required | Sometimes | Not required |
| Business Tax Returns | Required | Sometimes | Not required |
| Personal Financial Statement | Required | Required | Sometimes |
| Rent Roll | Required | Required | Required |
| Operating Statements | Required | Required | Required |
| Purchase Contract | Required | Required | Required |
| Entity Documents | Required | Required | Required |
| Appraisal | Required | Required | Required |
Standard Documentation Package
Most commercial loans require:
Property Information: Rent roll, operating statements for 2 to 3 years, purchase contract, lease copies
Entity Documents: Articles of organization, operating agreement, EIN confirmation
Borrower Information: Personal financial statement, resume of experience, photo ID
Third-Party Reports: Appraisal, Phase I environmental, property inspection
Additional Requirements for Conventional and SBA
Traditional lenders also need:
Personal tax returns for 2 to 3 years
Business tax returns for 2 to 3 years
Bank statements for 3 to 6 months, both personal and business
Detailed business plan for SBA loans
Year-to-date financials
Streamlined Documentation
DSCR, bridge, and hard money loans require less personal financial documentation. The focus shifts to property performance and asset value. This reduced paperwork is one reason investors choose these programs despite higher rates.
How Do You Choose the Right Commercial Real Estate Loan?
Selecting the optimal loan type requires matching your financing to your investment strategy, timeline, and qualifications.
Loan Selection Decision Matrix
| Your Priority | Best Choice | Second Choice | Avoid |
|---|---|---|---|
| Lowest interest rate | SBA 504 | Conventional | Hard Money |
| Fastest closing | Hard Money | Bridge Loan | SBA |
| Maximum leverage | SBA 504/7(a) | DSCR | Hard Money |
| Minimal documentation | Hard Money | DSCR | SBA |
| Longest fixed term | SBA 504 | Conventional | Bridge |
| Non-recourse | DSCR | Conventional | SBA |
Match Loan to Investment Strategy
Buy and hold stabilized property: Conventional or SBA loans offer the lowest long-term cost.
Value-add with renovation: Bridge loans provide flexibility during the improvement period, then refinance to permanent debt.
Quick flip or short hold: Bridge or hard money makes sense when you plan to exit within 1 to 2 years.
Portfolio building: DSCR loans let you scale without income verification constraints.
Consider Total Cost, Not Just Rate
A bridge loan at 10% might be cheaper than a conventional loan at 7.5% if it lets you close a deal that would otherwise slip away. Calculate the total cost including origination fees, closing costs, prepayment penalties, and opportunity cost.
Factor in Flexibility
Some loans offer prepayment flexibility while others lock you in with yield maintenance or defeasance. If you might refinance or sell within a few years, prepayment terms matter more than a slightly lower rate.
Not sure which loan fits your situation? Schedule a consultation with our team to review your deal and identify the best financing strategy.
What Are Common Mistakes to Avoid with Commercial Real Estate Loans?
Learning from others' mistakes saves time, money, and stress. Here are the most common pitfalls we see and how to avoid them.
Avoid These Common Mistakes
- Underestimating closing costs (budget 3-5%). 2. Ignoring prepayment penalties. 3. Focusing only on rate instead of total cost. 4. Incomplete documentation causing delays. 5. Not shopping multiple lenders.
Underestimating Closing Costs
Commercial loan closing costs typically run 3% to 5% of the loan amount. On a $2 million loan, that is $60,000 to $100,000. Budget for origination fees of 0.5% to 2%, appraisal costs of $3,000 to $10,000, legal fees, title insurance, and reserves.
Ignoring Prepayment Penalties
Many commercial loans include significant prepayment penalties, especially in the early years. Yield maintenance and defeasance can cost tens of thousands of dollars if you sell or refinance unexpectedly. Understand these terms before signing.
Choosing Based on Rate Alone
The lowest rate does not always mean the best deal. A loan with a 0.25% higher rate but no prepayment penalty and lower closing costs might save money overall. Evaluate the complete package.
Skipping Due Diligence
Rushing through property inspection, lease review, and financial analysis leads to expensive surprises. Take time to understand exactly what you are buying before committing to a loan.
Going with the First Lender
Shopping matters in commercial lending. Rate and term quotes vary significantly between lenders. Getting multiple quotes ensures you receive competitive pricing and find the best fit for your deal.
Not Planning the Exit
Every loan needs an exit strategy. Whether you plan to hold long-term, refinance after stabilization, or sell at a profit, your financing should align with your timeline. Mismatched loan terms and investment horizons create problems.
Getting Started with Your Commercial Real Estate Loan
Securing the right commercial real estate loan can mean the difference between a good investment and a great one. The right financing reduces your cost of capital, aligns with your investment strategy, and positions you for long-term success.
Here is your action plan:
Step 1: Define your investment strategy and timeline. This determines which loan types make sense.
Step 2: Gather your documentation including financials, property information, and entity documents.
Step 3: Get pre-qualified to understand your borrowing power before making offers.
Step 4: Compare multiple lenders to ensure competitive terms.
Step 5: Close with confidence knowing you have the right financing in place.
At Clearhouse Lending, we specialize in commercial real estate financing for investors and business owners. Our team has closed hundreds of commercial loans and can guide you to the right solution for your specific situation.
Ready to get started? Contact us today for a free consultation. We will review your deal, explain your options, and provide a customized financing recommendation within 24 hours.
Whether you are acquiring your first commercial property or expanding a portfolio, we are here to help you succeed. Reach out now and let us put our expertise to work for your investment.