What Is a Commercial Real Estate Loan?
A commercial real estate (CRE) loan finances income-producing properties — office, retail, industrial, multifamily (5+ units), and hotels. Underwriting is based on the property's income (DSCR) rather than personal income.
Commercial Real Estate Loan Rates & Terms
CRE loan rates: 5.5-10%. Terms: 5-10 years, amortized over 20-25 years (with balloon at maturity). Down payments: 20-35%. Loan amounts: $250,000 to $50+ million.
How Does a Commercial Real Estate Loan Work?
Lenders evaluate NOI and DSCR (DSCR = NOI ÷ Annual Debt Service). Minimum DSCR of 1.25 typically required. LTV capped at 65-80%. Most CRE loans have a balloon payment at 5-10 years.
Key Features of Our Commercial Real Estate Loan
DSCR Analysis
Calculate Debt Service Coverage Ratio
Balloon Payment
Model 5/10-year balloon structures common in CRE
✅ Pros
- Leverage allows larger acquisitions
- Interest is tax-deductible
- Fixed rates available
- Property appreciation builds equity
⚠️ Cons
- Higher down payments (20-35%)
- Balloon payments at 5-10 years
- Higher rates than residential
- Personal guarantees often required
Commercial Real Estate Loan vs Alternatives
Commercial Real Estate Loan vs SBA 7(a) Loan
Government-guaranteed with longer terms and potentially lower rates for owner-occupied properties (51%+). Conventional CRE has fewer restrictions but higher down payments.
Commercial Real Estate Loan vs SBA 504 Loan
Fixed-rate, 20-25 year terms with only 10% down for owner-occupied properties. Conventional CRE is more flexible on property types.
How to Qualify for a Commercial Real Estate Loan
Lenders evaluate: DSCR (min 1.25), LTV (max 65-80%), credit score (680+), net worth (1x loan), liquidity (6-12 months reserves). Property must be income-producing with stable tenants.