Commercial real estate (CRE) is one of the most reliable wealth-building strategies available, but securing the right financing is critical to success. Whether you are purchasing your first commercial property or expanding a portfolio, understanding the different loan types and how they work will help you make smarter investment decisions.
Types of Commercial Real Estate Loans
Commercial real estate financing comes in several forms, each designed for different situations and property types.
- Conventional CRE Loans: Traditional bank loans with competitive rates for well-qualified borrowers. Typically require 25-30% down and strong credit.
- SBA 504 Loans: Government-backed loans for owner-occupied commercial properties with down payments as low as 10%.
- Bridge Loans: Short-term financing (6-36 months) for acquisitions, repositioning, or properties that need stabilization before qualifying for permanent financing.
- CMBS Loans: Large-balance loans that are pooled and sold on the secondary market. Best for stabilized properties with strong cash flow.
- DSCR Loans: Qualify based on property cash flow rather than personal income. Learn more about DSCR loans.
- Construction Loans: Finance ground-up construction projects from land acquisition through completion. Explore construction financing.
What Lenders Evaluate
Commercial real estate lenders evaluate both the property and the borrower. On the property side, they look at the location, condition, occupancy rate, net operating income (NOI), and comparable sales or rental data. On the borrower side, they assess your credit history, net worth, liquidity (cash reserves), and prior real estate experience. The more experience you have, the more favorable terms you can typically negotiate.
Key Metrics You Need to Know
Understanding CRE financing metrics is essential for evaluating deals and communicating with lenders.
- Loan-to-Value (LTV): The loan amount divided by the property value. Most CRE loans cap at 65-80% LTV.
- Debt Service Coverage Ratio (DSCR): NOI divided by annual debt service. Lenders typically want 1.20 or higher.
- Cap Rate: NOI divided by the purchase price. Helps you evaluate the return on investment.
- Net Operating Income (NOI): Total rental income minus operating expenses (excluding debt service).
Property Types That Qualify
Commercial real estate loans are available for virtually every property type, including office buildings, retail centers and strip malls, industrial warehouses, multifamily properties with five or more units, mixed-use buildings, self-storage facilities, hotels and hospitality properties, and medical offices. Each property type may have specific lender requirements and preferred loan structures.
How to Strengthen Your CRE Loan Application
To improve your chances of approval and secure better terms, present a clear business plan for the property, demonstrate your real estate experience, show strong personal liquidity (ideally 6-12 months of debt service in reserves), maintain a credit score above 680, and provide detailed property financials including rent rolls, operating statements, and lease agreements.
Get Your CRE Deal Funded
Slate Financial works with commercial real estate lenders nationwide, offering bridge loans, permanent financing, SBA loans, and DSCR programs. Our team can help you structure your deal and find the best financing option.
Apply for Commercial Real Estate Financing and talk to a CRE specialist today.
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Slate Financial Team
Founder & CEO, Slate Financial
David R. Bizousky is a financial services entrepreneur and the founder of Slate Financial, a leading alternative lending platform that has funded over $2.5 billion for 10,000+ businesses across all 50 states.