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Commercial Real Estate Loans: A Complete Guide for 2026
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Key Concept
- Commercial real estate loans finance property used for business purposes, with rates starting around 5% in 2026
- Most lenders require 20-35% down payment, a credit score of 680+, and a DSCR of 1.20x or higher
- SBA 504 loans offer up to 90% financing with fixed rates and terms up to 20 years
- Loan types include conventional mortgages, SBA loans, bridge loans, CMBS loans, and hard money loans
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).
How Commercial Real Estate Loans Work
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.
Types of Commercial Real Estate Loans
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 Real Estate Loan Rates in 2026
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:
| Loan Type | Rate Range | Typical Term |
|---|---|---|
Conventional Bank Loan | 5% - 8% | 5 - 20 years |
SBA 504 (CDC portion) | 5% - 6.5% | 10, 20, or 25 years |
SBA 7(a) | 9% - 11% | Up to 25 years |
CMBS | 5% - 7% | 5 - 10 years |
Bridge Loan | 8% - 12% | 6 months - 3 years |
Hard Money | 10% - 15% | 1 - 5 years |
How to Qualify for a Commercial Real Estate Loan
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:
Steps to Qualify
Check Your Credit Score
Most conventional CRE lenders require a minimum credit score of 680. SBA loans may accept scores as low as 640 for strong applications. Higher scores unlock better rates and terms.
Prepare Your Down Payment
Plan for 20% to 35% down for conventional loans. SBA 504 loans require as little as 10%. Hard money lenders typically want 30% to 40% down. You will also need 3 to 6 months of loan payments in cash reserves.
Calculate Your Property's DSCR
Divide the property's net operating income (NOI) by the annual debt service (total loan payments). A DSCR of 1.25x means the property earns 25% more than the loan payment. Most lenders require at least 1.20x.
Gather Your Financial Documents
Prepare two to three years of personal and business tax returns, a personal financial statement, a business plan or executive summary, property financials (rent rolls, operating statements), and a current balance sheet.
Get a Property Appraisal
The lender will order a commercial appraisal to confirm the property's market value. This determines your maximum loan amount based on the LTV ratio. Commercial appraisals typically cost $2,000 to $5,000 and take 2 to 4 weeks.
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Compare business loan providers here!Eligible Property Types
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.
- Office buildings (single-tenant, multi-tenant, medical offices)
- Retail properties (strip malls, standalone stores, shopping centers)
- Industrial and warehouse (distribution centers, manufacturing facilities, flex space)
- Multifamily apartments (5+ units; properties with 4 or fewer units typically qualify for residential loans)
- Hospitality (hotels, motels, resorts)
- Mixed-use properties (ground-floor retail with apartments or offices above)
- Self-storage facilities
- Special purpose (gas stations, car washes, restaurants, medical facilities)
Where to Find Commercial Real Estate Loans
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.
Frequently Asked Questions
What are commercial real estate loans?
Commercial real estate loans are mortgages secured by commercial property (offices, retail, warehouses, apartment buildings with 5+ units, hotels). They finance the purchase, construction, renovation, or refinancing of property used for business purposes. Unlike residential mortgages, they are underwritten based on the property's income potential and the borrower's business financials.
Do you have to put 20% down on a commercial loan?
Most conventional commercial loans require 20% to 35% down. However, SBA 504 loans allow as little as 10% down for qualifying owner-occupied properties. The exact amount depends on the loan type, property class, and your credit profile. Stronger borrowers and lower-risk properties may qualify for lower down payments.
What is the 2% rule in commercial real estate?
The 2% rule is a quick screening tool used by investors. It suggests that a rental property's monthly rent should be at least 2% of the purchase price to generate positive cash flow. For example, a $500,000 property should rent for at least $10,000 per month. In practice, most markets today make the 2% rule difficult to achieve, so many investors use 1% or even 0.8% as a more realistic benchmark.
What credit score do you need for a commercial real estate loan?
Most lenders require a minimum credit score of 680 for conventional commercial real estate loans. SBA loans may accept scores as low as 640 for strong applications. Hard money lenders have minimal credit requirements, focusing primarily on the property's value. A score above 700 typically unlocks better rates and terms.
How long does it take to get a commercial real estate loan?
Closing times vary by loan type. Conventional bank loans typically take 30 to 90 days. SBA loans can take 60 to 120 days due to the government guarantee process. Bridge and hard money loans close fastest, often in 7 to 21 days. Factors like property complexity, appraisal timing, and document preparation affect the timeline.
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