Commercial real estate loans finance office buildings, retail spaces, warehouses, and multifamily properties. Understanding these loans helps businesses make informed property decisions.

Types of Commercial Loans

Options include traditional bank loans, CMBS loans (sold as securities), life insurance company loans, and SBA 504 loans for owner-occupied properties.

Qualification Criteria

Lenders evaluate property (location, condition, occupancy, income), borrower (credit, experience, financial strength), and market conditions.

Loan-to-Value Ratios

Conventional loans typically cap at 75-80% LTV. Higher leverage is possible with strong cash flow, excellent credit, or SBA programs.

Interest Rates and Terms

Current rates range 5-8% for well-qualified borrowers. Terms typically 5-20 years with 20-30 year amortization schedules.

Prepayment Penalties

Most commercial loans include prepayment penalties, often structured as declining percentages over the first 3-5 years.

Conclusion

Commercial real estate loans require substantial due diligence but enable businesses to build equity and control their operational space.