Commercial Real Estate Loans: A Complete Guide for 2026

So, what is a commercial real estate loan? A commercial real estate (CRE) loan is a mortgage secured by a lien on commercial property rather than residential property. Commercial properties include office buildings, retail centers, warehouses, apartment complexes with five or more units, hotels, and mixed-use developments.

Businesses use CRE loans to purchase, construct, renovate, or refinance properties they either occupy or lease to tenants. These loans are typically made to business entities like LLCs, corporations, partnerships, and real estate investment trusts.

Unlike a standard home mortgage, commercial real estate loans are underwritten primarily based on the property's income-generating potential. Lenders evaluate how much rental income the property produces relative to the loan's debt payments, a metric called the debt service coverage ratio (DSCR).

Commercial real estate lending works differently from residential mortgages in several important ways.

Loan terms are shorter. Most CRE loans run 5 to 20 years, compared to the standard 30-year residential mortgage. The amortization period is often longer than the actual loan term, which means you'll face a balloon payment at maturity.

For example, a lender might offer a 10-year term with 25-year amortization. You make monthly payments as if you had 25 years to repay, but the remaining balance comes due after 10 years. At that point, you refinance or pay the balance in full.

Interest rates are higher. Commercial mortgage rates currently range from about 5% to 12% depending on the loan type, property class, and borrower profile. The strongest borrowers with prime properties can secure rates in the 5% to 7% range, while riskier deals push into double digits.

Down payments are larger. Most lenders require 20% to 35% down on commercial properties. SBA-backed loans are the exception, allowing as little as 10% down for owner-occupied properties.

Qualification focuses on the property. Lenders look at the property's income, not just your personal income. The key metric is DSCR, which measures whether rental income covers the debt payments. Most lenders want a DSCR of at least 1.20x to 1.25x, meaning the property generates 20% to 25% more income than the loan payment requires.

Several loan products exist for commercial real estate, each suited to different situations and property types. Your best option depends on factors like whether you occupy the property, how long you plan to hold it, and how quickly you need funding.

Conventional Commercial Mortgages

Traditional banks and credit unions offer these loans for stabilized, income-producing properties. They typically feature the lowest rates (currently 5% to 8%) but have strict qualification requirements.

Key features:

• Terms of 5 to 20 years with amortization up to 30 years
• LTV ratios of 65% to 80% (meaning 20% to 35% down)
• Require strong credit (680+) and proven property income
• Best for: established investors buying stabilized properties

SBA 504 Loans

SBA commercial real estate loans through the 504 program provide long-term, fixed-rate financing specifically designed for small businesses purchasing owner-occupied commercial property. This is one of the most affordable options available.

How the 504 structure works:

• A conventional lender provides 50% of the project cost (first lien)
• A Certified Development Company (CDC) provides up to 40% (second lien, SBA-backed)
• The borrower contributes just 10% as a down payment

Current limits and terms:

• Maximum SBA portion: $5 million for most businesses, $5.5 million for manufacturers and qualifying green energy projects
• Fixed interest rates on the CDC portion, tied to Treasury rates
• Terms of 10 or 20 years for real estate (25 years available for some projects)
• A $5 million SBA second at 40% of the project supports a $12.5 million total project

Eligibility requirements:

• Must be a for-profit business operating in the U.S.
• Net worth under $15 million
• Average net income under $5 million (after federal taxes) over the two years before application
• Property must be at least 51% owner-occupied

SBA 7(a) Loans

The SBA 7(a) program is the most common SBA loan and can be used for commercial real estate purchases up to $5 million. Unlike the 504, the 7(a) loan comes from a single lender with an SBA guarantee.

Key features:

• Maximum loan: $5 million
• Down payment: typically 10% to 20%
• Terms up to 25 years for real estate
• Rates based on prime plus a spread (currently in the 9% to 11% range)
• More flexible than 504 loans on property occupancy requirements

Bridge Loans

Bridge loans provide short-term financing (typically 6 months to 3 years) to cover the gap until permanent financing is secured. They are commonly used to acquire properties quickly, fund renovations before refinancing, or stabilize a property's occupancy before qualifying for a conventional loan.

Key features:

• Terms of 6 months to 3 years
• Higher interest rates, typically 8% to 12% or more
• LTV up to 70% to 75%
• Faster closing than conventional loans (often 2 to 4 weeks)
• Interest-only payments common during the loan term
• Best for: investors who need to move fast or are repositioning a property

CMBS Loans (Commercial Mortgage-Backed Securities)

CMBS loans are originated by lenders and then bundled into securities sold to investors. Because the lender sells the loan, they can often offer more competitive rates than portfolio lenders.

Key features:

• Loan amounts typically $2 million and up
• Fixed rates, often 5% to 7%
• Terms of 5 to 10 years with 25- to 30-year amortization
• Non-recourse (lender can only claim the property, not personal assets)
• Stricter prepayment penalties (defeasance or yield maintenance)
• Best for: larger deals on stabilized properties where the borrower wants non-recourse terms

Hard Money Loans

Hard money lenders are private lenders who focus almost entirely on the property's value rather than the borrower's creditworthiness. These loans close fast but cost significantly more.

Key features:

• Rates of 10% to 15% plus origination fees of 2 to 5 points
• Terms of 1 to 5 years
• LTV of 60% to 70%
• Minimal credit requirements
• Funding in as little as 7 to 14 days
• Best for: borrowers who can't qualify elsewhere, need speed, or are doing quick-turnaround projects

Commercial mortgage rates vary widely depending on the loan type, property, and borrower profile. As of early 2026, the 10-Year Treasury yield sits around 4.27%, which serves as the benchmark for most long-term fixed commercial rates.

Here is a general overview of current rate ranges by loan type:

Understanding commercial real estate loan requirements is critical before applying. Here is how to get a commercial real estate loan and what most lenders will evaluate:

Commercial real estate loans can finance a wide range of property types. Lenders evaluate each type differently based on its risk profile and income stability.

Multiple types of lenders offer CRE financing, each with different strengths.

Banks and credit unions offer the most competitive rates but have stricter qualification requirements and longer closing times. They are best for borrowers with strong credit and established businesses.

SBA-approved lenders provide government-backed loans with lower down payments. Find a Certified Development Company (CDC) near you through the SBA's lender match tool to get started with a 504 loan.

CMBS lenders specialize in larger deals and offer non-recourse terms. They are best for experienced investors with stabilized properties.

Private and hard money lenders fill the gap when traditional lenders say no. They charge more but close faster and accept higher-risk situations.

Compare business loan options on Financer to find the right fit for your commercial real estate project.