Best Commercial Real Estate Loan
Commercial real estate loans finance income-producing property—think apartment buildings, office, retail, industrial, hotels, self-storage, and special-use assets. Compared with home mortgages, CRE debt has more moving parts: stricter underwriting, heavier documentation, different fee structures, and often a balloon payment. Below is a clear, practical walkthrough so you can evaluate options and avoid expensive surprises.
What counts as CRE—and who lends?
CRE is property held primarily for business or investment (not your personal residence). Lenders include:
Banks/credit unions (portfolio loans): Common for local and mid-market deals; flexible terms, relationship-driven.
Agency lenders (multifamily): Fannie Mae/Freddie Mac specialize in apartments; competitive rates, standardized rules.
Life insurance companies: Favor top locations/low leverage; long fixed terms.
CMBS (securitized loans): Non-recourse, fixed rates, strict servicing; common for stabilized properties.
SBA lenders (owner-occupied): SBA 7(a) and 504 programs help operating businesses buy/build their facilities.
Debt funds/bridge lenders: Short-term, faster closes, higher rates; great for transitions (lease-up, repositioning).
Specialty lenders: Hotels, self-storage, single-tenant net lease, etc.
Core terms to know (and why they matter)
Loan-to-Value (LTV): Loan ÷ Property Value. Typical max ranges ~50–80% depending on asset, lender, and risk.
Loan-to-Cost (LTC): For construction/renovation: Loan ÷ Total Project Cost.
Net Operating Income (NOI): Property income minus operating expenses (before debt service and taxes). Lenders normalize NOI by applying market vacancy, excluding one-offs, and adding replacement reserves.
Debt Service Coverage Ratio (DSCR): NOI ÷ Annual Debt Service. Most lenders want ≥1.20× to 1.40×+ (riskier assets require higher).
Debt Yield: NOI ÷ Loan Amount. A lender “backstop” metric; often 8–12% minimum.
Amortization vs. term: You might see a 5- or 10-year term with 25–30-year amortization—creating a balloon at maturity.
Rate type: Fixed or floating (often SOFR + spread). Floating loans usually require rate caps.
Interest-only (I/O): Some periods require interest only, improving early cash flow but delaying principal paydown.
Recourse vs. non-recourse: Recourse includes personal guarantees; non-recourse limits liability but includes “bad-boy” carveouts.
Prepayment penalties: Step-down (e.g., 5-4-3-2-1), yield maintenance, or defeasance—critical if you might sell early.
Assumability: Some loans can be assumed by a buyer (handy if rates rise).
Common CRE loan types
Permanent (stabilized) loans: For fully leased or near-stabilized assets. Longer terms, fixed or floating, with amortization and possible I/O period.
Bridge loans: Short-term (typically 1–3 years) to fund lease-up, renovations, or time-sensitive acquisitions; higher rates/fees but fast and flexible.
Construction loans: Fund ground-up or heavy value-add. Structured as LTC, with draws, interest reserves, and completion/stabilization covenants.
SBA 7(a)/504 (owner-occupied):
7(a): Flexible uses (purchase, improvements, working capital), smaller to mid-sized balances.
504: Typically a 50/40/10 structure—bank first mortgage (≈50%), SBA debenture (≈40%), borrower equity (≈10%). Good for fixed-asset purchases with long fixed-rate on the SBA piece. Owner-occupancy is required (generally ≥51% of existing buildings; higher for new construction).
Mezzanine & preferred equity: Gap financing above the senior loan to reach higher leverage. More expensive and complex (intercreditor agreements).
How lenders underwrite (what they actually look at)
Income durability: Rent rolls, tenant quality, lease terms (length, options, escalations), rollover schedule, and market vacancy.
Expenses: CAM, real estate taxes, insurance, management, utilities, maintenance, reserves. Lenders may “stabilize” expenses if yours look unusually low.
Property condition & risks: Appraisal, Phase I environmental (and Phase II if needed), ALTA survey, zoning, seismic/flood exposure, and property condition report.
Sponsorship/guarantors: Experience, net worth, liquidity (post-close cash), track record with the asset type and market.
Market fundamentals: Supply/demand, comps, absorption, and replacement cost.
Lenders size the loan by whichever constraint is tighter: LTV, DSCR, or debt yield.
A quick, concrete example
Purchase price (value): $10,000,000
Stabilized NOI: $650,000
Lender max LTV: 65% → cap is $6.5M
Min DSCR: 1.30× → Max annual debt service = 650,000 ÷ 1.30 = $500,000
At 6.50% with 25-year amortization, $500,000/year supports roughly $6.17M of loan.
Here, DSCR (≈$6.17M) is tighter than the LTV cap ($6.5M), so the maximum loan is about $6.17M and equity needs are ≈$3.83M.
Rates, fees, and what closing really costs
Rates: Driven by market benchmarks (e.g., SOFR for floaters, UST/Treasury swaps for fixed) plus lender spread. Better markets, lower leverage, and stronger sponsors get better pricing.
Origination fees: Often 0.5–1.5% of the loan (can be more with bridge/mezz).
Third-party reports: Appraisal (≈$3k–$10k+), environmental (≈$2k–$5k+), property condition (varies), survey/title/escrow.
Legal: Borrower counsel plus lender’s counsel (you pay both in most CRE loans).
Reserves & escrows: Taxes, insurance, replacement reserves, and sometimes TI/LC (tenant improvement/leasing commission) reserves in office/retail/industrial.
Prepayment: Understand the method (step-down vs. yield maintenance/defeasance) and lockout periods.
Timeline: A bank or agency permanent loan often takes 45–90 days from signed term sheet to close (bridge can be faster). Construction loans add time for budgets, plans, permits, GC contract, and inspections.
Key structures & covenants you’ll see
Cash management: From soft springing cash sweeps (if DSCR falls) to hard lockboxes where rent flows to a controlled account.
Financial covenants: Minimum DSCR or debt yield; breaches may trigger cash sweeps or default if not cured.
Leasing controls: Lender approval for major leases, SNDA (Subordination, Non-Disturbance, Attornment), tenant estoppels, and limits on free rent/allowances.
Guaranties: Full or partial recourse in many bank/construction loans; non-recourse with carveouts for CMBS/life co/agency (bad-faith acts trigger liability).
Insurance: Property, liability, sometimes business interruption/rent loss; flood/seismic where applicable.
Construction loan specifics (and pitfalls)
Budget & contingency: Hard costs, soft costs, and a contingency (≈5–10%) are baked in. Lender won’t fund change orders casually.
Draw process: Inspector verifies progress before each draw; be ready for float.
Interest reserve: Capitalized interest so the project doesn’t rely on operating cash before stabilization.
Completion & carry risks: Completion guarantees, performance bonds, and requirements for stabilization (e.g., 90% leased for 90 days).
Perm takeout: Some construction loans require a committed permanent loan at completion (rate locks, forward commitments).
SBA 7(a) vs. 504—owner-users
If your business occupies the space:
7(a): More flexible use of proceeds (FF&E, working capital). Rates often floating; shorter amortizations than 504.
504: Geared to real estate/equipment with a long fixed-rate on the SBA debenture portion. Typical structure lowers equity to ~10% (more for special-purpose properties or startups). Excellent for locking long-term occupancy costs.
How to strengthen your application
Deliver a clean pro forma: Rent roll, trailing 12-month P&L, realistic lease-up assumptions, and market support for rents and vacancy.
Show post-close liquidity: Lenders like sponsors with cash buffers for surprises (repairs, downtime).
Right-size leverage: Lower LTV and stronger DSCR widen lender appetite and reduce pricing.
Plan for rollover: Map lease expirations, TI/LC budget, and reserve strategy—before the lender asks.
Pick the right product: Don’t force a permanent loan on a transitional asset; bridge first, perm later saves headaches.
Negotiate prepay early: If exit flexibility matters, argue for step-down or shorter lockout versus rigid yield maintenance.
Quick glossary (clip-and-save)
NOI: Income after operating expenses, before debt service.
DSCR: NOI ÷ Annual Debt Service; lender cushion for payment risk.
Debt Yield: NOI ÷ Loan Amount; lender’s leverage “speed limit.”
LTV/LTC: Leverage versus value/cost.
I/O: Interest-only period (no principal).
Defeasance/Yield Maintenance: Ways to make lenders economically whole when you prepay a fixed loan early.
Bad-boy carveouts: Non-recourse until fraud/waste or certain bad acts—then guarantor liability kicks in.
Why choose FinzExpert for the Best-Fit Commercial Real Estate Loan
You don’t just need capital—you need the right capital, structured to your asset, business plan, and exit. FinzExpert blends lender-grade underwriting with deep market access so you get speed, certainty, and terms that work in the real world.
What makes FinzExpert different
Capital markets reach + direct options
One application opens doors to bank, agency (multifamily), life-co, CMBS, SBA (7(a)/504), bridge/debt-fund, and specialty lenders—plus select direct programs. More options → better fit.Underwrite first, shop second
We size proceeds by the true constraints—DSCR, LTV, and Debt Yield—then shop your deal precisely where it clears best. That means fewer surprises and stronger term sheets.Whole capital stack, one team
Senior, bridge, construction, mezz/pref, or a combo. We stack capital intentionally to match lease-up, repositioning, or ground-up timelines.Speed & certainty of execution
Tight critical-path management (term sheet → diligence → close), lender-approved checklists, and proactive issue clearing on appraisal, environmental, survey, and estoppels/SNDAs.Smarter structure, lower lifetime cost
We don’t chase the lowest headline rate while ignoring prepay math. We negotiate prepayment (step-down vs. yield maintenance/defeasance), I/O windows, amortization, recourse carve-outs, and assumability to reduce total cost of capital.Non-recourse where it counts
Access to non-recourse options (CMBS/agency/life-co) with sensible carve-outs; recourse only when it improves pricing or proceeds meaningfully.SBA expertise for owner-users
Clear guidance on 7(a) vs. 504, typical 50/40/10 structures, eligibility, and how to align the real estate loan with your operating company’s cash flow.Transparent economics
Itemized fee letters and third-party costs up front. No games, no “gotchas.” You’ll know your all-in before you sign.Post-close support
We stay available on covenants, cash-management triggers, extensions, assumptions, and refi timing when markets move.
What we finance
Asset types: Multifamily, industrial, retail, office repositioning, self-storage, hospitality, medical/office, special-use (case-by-case).
Loan types: Permanent (fixed/floating), bridge/value-add, construction, SBA 7(a)/504 (owner-occupied), CMBS, agency multifamily, mezzanine/preferred equity.
How we work (end-to-end)
Discovery & deal model – Rent roll, T-12, business plan, capex, and exit.
Indicative sizing – Proceeds bounded by DSCR/LTV/Debt Yield; sources & uses.
Market run – Curated lender list; negotiate rate, I/O, prepay, recourse, covenants.
Select & sign – Side-by-side term-sheet matrix; choose best-fit structure.
Diligence & docs – Appraisal, Phase I/II, PCA, ALTA survey, title/escrow; close calendar and weekly status.
Close & beyond – Funding, covenant handoff, and refi/assumption planning.
What you get from us—deliverables you can act on
Term-sheet matrix: Apples-to-apples comparison of APR/spread, amortization, I/O, prepay method, covenants, fees, and closing timelines.
10-year pro forma + sensitivities: Stress tests for vacancy, rates (SOFR/Treasury), and exit cap.
Covenant map: DSCR/debt-yield tests, cash-sweep triggers, leasing controls, and cure mechanics.
Closing calendar: Critical path with owner, lender, counsel, and third parties aligned.
Designed for real-world constraints
Transitional assets: Bridge → perm take-out aligned to lease-up milestones and DSCR hurdles.
Construction: LTC-based budgets, interest reserves, contingency, and completion/stabilization covenants negotiated up front.
Refis in a rate-volatile market: Cap/hedge guidance for floaters, forward-rate considerations, and assumption strategy if you might sell.
Investor & owner-user friendly
Investors/Developers: Maximize proceeds without tripping covenants; preserve exit flexibility.
Owner-Occupiers: Align debt service with business cash flow; choose SBA 504 for long fixed-rate stability or 7(a) for flexibility.
Our promise
Clarity over hype. We’ll show the true total cost of capital, not just a teaser rate.
Execution over noise. Weekly updates, one point of accountability, no last-minute surprises.
Your plan first. If the “cheapest” structure risks your exit or DSCR, we’ll recommend a better one—even if it’s smaller.
