Overview of commercial real estate loan types, terms, and lenders

Types of commercial real estate loans

Commercial real estate loans fall into six main types: conventional commercial mortgages, bridge loans, hard money loans, SBA 7(a) loans, SBA 504 loans and mezzanine financing. Conventional mortgages carry the longest terms and the lowest rates. Bridge and hard money loans trade higher rates for speed. SBA loans require owner occupancy. Mezzanine debt fills the gap between senior debt and equity.

For the following professionals, understanding the commercial loan process is vitally important:

• An investor seeking a new loan for an existing property.

• A developer seeking a loan for an upcoming project.

• A mortgage broker trying to find the right loan for a client.

• A commercial lender of any kind.

In general, commercial real estate loan types can be broken out into three broad categories, loans for investment, loans for development, and loans for businesses. To cut through some of the complexities of the lending process, and to aid in your property debt research, we’ll look at six different loan types, including new loans and refinance loans.

How long are commercial real estate loan terms?

Most commercial real estate loans carry a term of 5 to 10 years, amortized over 20 to 25 years. Because the amortization schedule runs longer than the term, the borrower owes a balloon payment for the remaining balance when the term ends. SBA loans are the exception and can amortize fully over 25 years with no balloon.

Why the term and the amortization period are not the same thing

A commercial loan term is the length of time the loan agreement runs. The amortization period is the schedule used to calculate the monthly payment. On a residential mortgage the two usually match, so a 30 year loan pays off in 30 years. On commercial debt they rarely match. A lender may write a 7 year term on a 25 year amortization schedule, which keeps the monthly payment low but leaves roughly 80% of the principal outstanding when the term expires.

That remaining balance is the balloon payment. Borrowers typically handle it by refinancing into a new loan, selling the asset, or paying it off from reserves. Lenders build the structure this way because it lets them reprice risk every 5 to 10 years rather than committing to a fixed rate for a quarter century.

What down payment and LTV do commercial lenders require?

Conventional commercial lenders generally cap loan-to-value at 75%, which means a 25% down payment. Bridge and hard money lenders often lend against a lower LTV on current value while underwriting to the projected stabilized value. SBA 7(a) and 504 loans are the outlier and can be done with 10% down, because the government guarantee absorbs part of the lender's risk. Special-use properties such as hotels or gas stations, and borrowers without an established business history, usually face a higher equity requirement of 15% to 20%.

What lenders underwrite beyond the property value

Value is only half the test. Lenders also check whether the property services its own debt. Debt service coverage ratio, or DSCR, divides net operating income by annual debt service, and most conventional lenders want to see at least 1.25. Credit matters too, though the threshold moves by product: conventional commercial mortgages generally call for a personal credit score of 700 or better, while hard money lenders weigh the asset far more heavily than the borrower.

Conventional commercial mortgage loans

A conventional commercial mortgage is a fixed-rate loan from a bank or institutional lender, secured by the property. Lenders typically require 25% down and write terms of 5 to 10 years. Borrowers generally need a personal credit score of 700 or higher. These loans carry the lowest cost of capital of the six types, but they also take the longest to close and demand the most documentation.

What is a Conventional Commercial loan?

Conventional commercial loans are similar to what you’d get when purchasing a single-family home, but often with shorter terms. A large portion of commercial real estate investors still purchase property using traditional, fixed-rate mortgages.

Conventional commercial loan terms

Lenders typically require a 25% down payment (minimum) in exchange for a fixed-rate mortgage ranging from 5 to 30 years. While home loans can last 20-30 years in a lot of cases, commercial mortgages will more often fall in the 5-10 year-term range. Lenders will order an appraisal to confirm the value of the property, and will want to see a copy of the financials to determine whether the existing rents can support the debt service.

Who uses conventional commercial loans?

Traditional, fixed-rate mortgages are more frequently used by investors looking to buy an existing, occupied asset with positive cash flow. Investors have to have good credit (700+), but in return, are able to access low-cost capital relative to the other loan products available to investors.

Conventional commercial loan lenders

Most of the big American banks offer conventional commercial mortgages. From JPMorgan Chase, to Wells Fargo, Capital One, Bank of America and so on, you can usually turn your local big bank for a conventional home or commercial loan.

Lenders might also include other large entities like insurance companies or property investment firms, with MetLife and Prudential serving as prominent examples there. For a list of commercial lenders of all types, you can visit Scotsman Guide’s lengthy lender directory.

Commercial Bridge loans

A commercial bridge loan is short-term financing, usually 6 to 12 months, used to carry a property until the owner refinances, sells or completes a repositioning. Rates run 50 to 200 basis points above a comparable fixed-rate commercial mortgage. Investors reach for bridge debt when a balloon payment is coming due or when a value-add plan has to be executed before a permanent lender will underwrite the asset.

What is a Commercial Bridge loan?

A commercial bridge loan is a source of short-term capital that is often used for debt service until an owner improves, refinances, leases, sells or otherwise completes a property transaction. For instance, a commercial bridge loan may be used by an investor that has a balloon payment coming due. The bridge loan may be used to fund the balloon payment before refinancing into a more traditional commercial loan.

Commercial Bridge loan terms

The short-term nature of these loans means that they come with a higher interest rate than a permanent commercial mortgage loan. Generally, commercial bridge loans are intended to provide 6-12 months’ worth of financing before repayment is due. The interest rate tends to be 50 to 200 basis points higher than a traditional, fixed-rate mortgage, though the interest rate will fluctuate depending on the nature of the deal.

An example of when you might use a commercial bridge loan

Let’s say you’re under agreement on a 200-unit apartment building that is running at a 30% vacancy rate.

You have an option on the property for $10 million, but your team believes that $2 million worth of upgrades could increase the property’s value to $18 million. Those renovations will take six to eight months to finish, after which time you should be able to raise rents. In this situation, you might use a commercial bridge loan worth $12 million to fund the acquisition and improvements. After you complete the renovations, you’d refinance the property into a traditional fixed-rate mortgage.

A 75% loan-to-value mortgage on a property valued at $18 million would be $13.5 million. At this point, you’d easily be able to pay off the commercial bridge loan, and increased rents would cover the debt service on the new $13.5 million mortgage.

Commercial bridge loan lenders

Lenders for commercial bridge loans are a bit harder to come by compared to conventional loans, and will usually be offered by companies with more robust capital solutions. Nationwide examples include Century Capital Partners, Avatar Financial Group, Silver Arch Capital Partners, and Money360.

Commercial hard money loans

A commercial hard money loan is short-term capital from a private lender or individual, secured by the property rather than by the borrower's credit. Interest rates typically fall between 10% and 20%. A hard money lender can fund within a week, against the 30 to 60 days a bank needs. The trade-off is cost, which makes hard money a tool for speed and flexibility rather than for a long-term hold.

What is a commercial hard money loan?

Hard money loans are an alternative form of capital, provided outside of traditional lending channels, either by individuals or companies. Hard money loans are secured by using commercial real estate as collateral. They’re a source of short-term capital, referred to by Investopedia as a loan of “last resort.”

These loans are used by individuals who need to move quickly in order to purchase, refinance or renovate a property. Hard money loans tend to have lower underwriting standards, but in exchange, have quick turnaround times. Hard money lenders have a bigger focus on the value and equity of a property rather than the creditworthiness of the borrower.

Unlike traditional or bridge loans, hard money loans are not subject to the same regulations that apply to financial institutions. As such, the proceeds can be used for a wider variety of purposes without significant scrutiny.

Commercial hard money loan terms

Hard money loans tend to be used in high-risk situations, or in situations where traditional financing is not an option. Therefore, they tend to be one of the higher-cost forms of capital with interest rates typically ranging between 10% and 20%. While not appropriate for every situation, hard money loans can be a good source of short-term capital when real estate investors need to move quickly or with a great deal of flexibility.

To put it in perspective, it may take a bank 30 to 60 days to approve and fund a traditional commercial real estate loan whereas a hard money lender may be able to release funds within a week.

Commercial hard money loan lenders

Commercial hard money lenders include many of the same lenders offering commercial bridge loans across the country. Examples of nationwide hard money lenders include LendTerra, Prescient Capital, Ajax Funding, and Pender Capital. See some more examples here.

SBA 7(a) Loans

An SBA 7(a) loan is a Small Business Administration backed loan of up to $5 million, used by businesses to purchase or refinance owner-occupied commercial property. The property must be at least 51% owner-occupied. Borrowers can put down as little as 10%. Rates are set by the lender as a base rate plus a spread that the SBA caps, so pricing moves with the prime rate rather than sitting inside a fixed range.

What is an SBA 7(a) loan?

There are two types of SBA loans that are generally of interest to commercial real estate investors: SBA 7(a) loans and SBA 504 loans. These loan types are those that are backed by the Small Business Administration (SBA). Both are beneficial for new and existing businesses looking to purchase or refinance owner-occupied commercial real estate (more on that later).

SBA 7(a) loans are the most common type of SBA loan. They’re used to help business purchase or refinance owner-occupied commercial properties up to $5 million. SBA 7(a) loans are often used for working capital, but can also be used to purchase commercial real estate.

SBA 7(a) loan terms

Generally, in order to qualify for an SBA 7(a) loan, the owner must put down at least 10% of the purchase price. Borrowers generally need a credit score of at least 680 and a business track record of roughly three years. Loans used for real estate are commonly amortized over 25 years.

SBA 7(a) rates are not a fixed range. The lender sets the rate as a base rate, most often the prime rate, plus a spread that the SBA caps according to loan size, so pricing moves whenever the base rate moves. The SBA publishes the current maximum spreads and the quarterly optional peg rate, and those published figures are the reliable place to check what a 7(a) will actually cost today.

The property must be at least 51% owner-occupied, which means an investor can use this for their own business as well as a property in which they have other tenants as well, as long as their space accounts for more than half of the total square footage.

SBA 7(a) loan lenders

Many American big banks are also providers of both SBA 7(a) and SBA 504 loans. Wells Fargo, TD Bank, US Bank, JPMorgan Chase, and so on again serve as examples here.

SBA 504 loans

An SBA 504 loan finances major fixed assets through a three-part structure: roughly 50% from a bank, up to 40% from a Certified Development Company through an SBA-guaranteed debenture, and 10% from the borrower. The CDC debenture is capped at $5 million, or $5.5 million for small manufacturers and eligible energy projects. The CDC portion carries a fixed rate for the life of the loan.

What is an SBA 504 loan?

SBA 504 Loans are similar to the SBA loans described above, but they are structured differently. Instead of a single loan, a 504 project combines a conventional bank loan, an SBA-guaranteed debenture issued through a Certified Development Company, and the borrower's own equity. The standard split is 50% bank, 40% CDC and 10% borrower, which is why these loans can be used for up to 90% of the purchase price of commercial real estate.

The SBA caps the CDC debenture at $5 million per project, rising to $5.5 million for small manufacturers and eligible energy public policy projects. There is no cap on total project cost, so larger deals remain possible when the bank portion carries more of the balance. As of July 4, 2026, a single borrower can hold up to $10 million in combined 7(a) and 504 balances, double the previous ceiling.

SBA 504 Loan terms

Debentures fund on 10, 20 and 25 year maturities. Real estate is normally financed on the 20 or 25 year debenture, while equipment uses the 10 year. As was the case above, the owner must occupy at least 51% of the property to qualify for an SBA 504 loan.

The rate on the CDC portion is fixed at the moment the debenture is sold, not when the application is filed, and it is priced off the 10-year Treasury yield plus a market spread. Because it locks at the bond sale, it stays fixed for the life of the loan. The bank portion is negotiated separately at market rates. Effective debenture rates are published monthly, so check the live figure rather than relying on a historical range.

SBA 504 loan lenders

SBA lenders are the same whether a borrower is part of the 7(a) program or the 504 program. See SBA lenders above.

SBA 504 vs SBA 7(a): which one fits the property?

Choose an SBA 504 loan when the money is going into real estate or heavy equipment and a fixed rate matters. Choose an SBA 7(a) loan when the deal needs flexibility, such as combining a property purchase with working capital or inventory. Both require 51% owner occupancy and both allow 10% down. The 504 usually prices lower on eligible assets, while the 7(a) closes faster and covers more uses.

Since July 4, 2026, the two programs no longer compete for the same ceiling. A borrower can carry up to $10 million across both, which makes pairing a 504 on the building with a 7(a) for working capital a realistic structure rather than a choice between the two.

Commercial mezzanine loans

A mezzanine loan is subordinate financing that fills the gap between the senior mortgage and the owner's equity in the capital stack. It is usually secured by the borrower's ownership interest in the property-owning entity rather than by the property itself. Because the lender sits behind the senior loan in repayment priority, mezzanine debt costs more than a conventional commercial mortgage.

What is a mezzanine loan?

Mezzanine financing is often used to fill the “middle” of a capital stack. It can be structured in a number of ways, with both debt and equity. For instance, it can take the form of junior debt, such as a second mortgage on the property. It can also be structured as preferred equity, convertible debt or participating debt. Let’s look at each of those in more detail:

Junior debt is typically used as a second source of capital, repaid only after a senior loan is repaid in full. Junior debt can be used for both acquisitions and development projects.

Preferred equity is an equity investment in the property-owning entity with a fixed, preferential return that is paid ahead of distributions to the “common” equity interests in the deal. Preferred equity is often used in joint-venture situations, where investors get a more secured position relative to the equity but a higher yield for being subordinate to the senior loan on the property.

Convertible debt, as its name implies, is a form of debt that can be converted into common equity at specific terms.

Participating debt is a form of capital whereby the investor(s) will receive interest payments and will share in part of the revenue generated by a commercial property above a specified level, including both rental income and sales proceeds. Participating debt is often used to finance commercial properties (usually, office and retail) that have well-known, financially stable tenants with long-term leases.

In all cases, mezzanine financing is subordinate to senior debt, such as a traditional mortgage on the property. Typically, mezzanine financing is not secured by the property but rather the equity the owner holds in the property. In terms of the capital stack, mezzanine debt tends to be a riskier position than the senior mortgage debt secured by the property, and therefore, the cost of mezzanine capital tends to be higher than a traditional commercial real estate loan.

Commercial mezzanine loan lenders

You can turn to the Commercial Mortgage Alert’s lengthy list of lenders that actively provide mezzanine financing on commercial properties. Examples include Apollo Global, Barings Real Estate, and Goldman Sachs. As you can see, there are a number of commercial real estate loan products available to real estate investors.

It’s important to find a lender that is adept with various programs to ensure you find the most appropriate (and lowest cost!) of capital.

How to check a property's existing debt before you finance it

Before structuring new debt on a commercial property, check what is already recorded against it. Existing mortgage amounts, lender names, origination dates and maturity dates all shape what a new lender will offer and whether a refinance makes sense. Public records carry this information, but it sits across thousands of county recorders and is rarely assembled in one place.

Maturity dates are the most actionable field of the lot. The typical holding period for a commercial loan sits in the 5 to 7 year range, so a loan approaching maturity signals an owner who will soon need to refinance or sell. Mortgage brokers and originators use that timing to source commercial mortgage leads before an owner goes to market.

Lender identity matters too. Knowing which institution holds the current note tells you what an owner is used to paying and which relationships you are competing against. Securitized debt behaves differently again, since CMBS loans carry prepayment and defeasance terms that make early refinancing expensive. Reonomy assembles recorded commercial mortgage data, ownership and property records into a single searchable view, so you can filter for maturing loans or a specific lender across an entire market rather than pulling documents parcel by parcel.

Frequently asked questions about commercial real estate loans

What is the average term of a commercial property loan?

Most commercial property loans run 5 to 10 years. The amortization schedule usually stretches to 20 or 25 years, which means the monthly payment is calculated as though the loan ran much longer, leaving a balloon payment for the remaining balance at the end of the term. SBA loans are the main exception and can amortize fully over 25 years.

What down payment do you need for a commercial property?

Conventional commercial lenders typically require 25% down, capping loan-to-value at 75%. SBA 7(a) and 504 loans allow as little as 10% down because the government guarantee reduces the lender's exposure. Special-use properties such as hotels or gas stations, and businesses under two years old, usually face a higher requirement of 15% to 20%. Bridge and hard money lenders vary widely and price the gap into the rate.

What is a balloon payment on a commercial loan?

A balloon payment is the outstanding principal that comes due when a commercial loan term ends before the amortization schedule has finished. On a 7 year term with a 25 year amortization, the borrower pays as though the loan runs 25 years, but the full remaining balance is owed in year 7. Borrowers usually refinance, sell the property, or pay it off from reserves.

How do you qualify for a commercial real estate loan?

Conventional commercial lenders look at three things: the property, the borrower and the cash flow. They generally want a personal credit score of 700 or higher, a debt service coverage ratio of at least 1.25, and 25% equity in the deal. Expect to provide an appraisal, a rent roll, historical operating statements, and business and personal tax returns. SBA loans add an owner-occupancy test of at least 51%.

What is the difference between an SBA 504 and an SBA 7(a) loan?

An SBA 7(a) loan is a single loan of up to $5 million that can fund real estate, equipment, working capital or a business acquisition, usually at a variable rate. An SBA 504 loan funds owner-occupied real estate and long-life equipment only, through a bank loan combined with a fixed-rate CDC debenture and 10% borrower equity. The 504 usually prices lower on eligible assets, while the 7(a) covers more uses and closes faster.

Can you refinance a commercial real estate loan?

Yes. Commercial refinancing is common at the end of a loan term, when a balloon payment comes due, or when a repositioned property has gained enough value to support better terms. Lenders re-underwrite the property at current value and cash flow, so a stabilized asset with improved net operating income will usually qualify for a lower rate than the original loan carried. Prepayment penalties and defeasance clauses on the existing loan determine whether refinancing early is worth the cost.

The right loan depends less on which product sounds cheapest and more on how long you plan to hold the asset and what the property's cash flow can support today. Getting that call right starts with knowing what debt is already on the building and who holds it.

See the full debt history, lender and maturity date on any commercial property in the country. 

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