Commercial Real Estate Financing FAQ

Commercial real estate LTV typically ranges 65-75% for stabilized properties. For strong investment-grade NNN properties, some lenders will go up to 75-80% LTV. Construction loans typically run 65-75% LTC (loan-to-cost). Multifamily often achieves higher LTV (75-80%) with agency financing (Fannie/Freddie). Owner-occupied SBA 504 loans can reach 90% LTV.

Most commercial lenders require a minimum Debt Service Coverage Ratio (DSCR) of 1.20x to 1.30x for stabilized properties. Stronger assets or properties with investment-grade tenants can achieve approvals at 1.15x. Value-add or less stabilized deals may require 1.35x+. DSCR is calculated as NOI / Annual Debt Service.

Typical commercial loan timeline: 45-75 days from application to funding. Bank portfolio loans: 30-60 days. CMBS: 60-90 days. SBA: 60-120 days. Bridge loans: 21-45 days. The timeline depends on third-party reports (appraisal, Phase I, survey), lender internal committee processes, and borrower document responsiveness.

Primary categories: (1) Conventional bank loans — most common, 5-10 year terms, 20-25 year amortization. (2) CMBS — securitized, competitive rates, rigid terms. (3) SBA 504 and 7a — government-backed, owner-occupied. (4) Bridge loans — short-term (1-3 years) for transitions. (5) Construction loans — draw-based financing for ground-up development. (6) Life company loans — institutional-quality properties. (7) Agency loans — multifamily specific (Fannie/Freddie).

As of early 2026, commercial mortgage rates range widely by lender type and asset quality. Conventional bank portfolio: ~6.5-7.5%. CMBS: ~6.0-7.0%. SBA 504: ~6.0-7.0%. Bridge loans: ~8.0-12.0%. Construction loans: Prime + 1-3% (~7.5-10%). Rates are volatile — always get fresh quotes at the time of financing decision.

Smaller commercial loans (under $2-5M) almost always require personal guarantees. Larger institutional loans (CMBS, life companies) on stabilized properties can be non-recourse, with carve-outs for 'bad boy acts' (fraud, misrepresentation, voluntary bankruptcy). Strong sponsors with established track records can sometimes negotiate limited or burn-off guarantees.

Recourse loans: The borrower (and guarantor) is personally liable for the debt beyond the property itself. If the property doesn't cover the loan at foreclosure, the lender can pursue personal assets. Non-recourse loans: The property is the only collateral. Lender cannot pursue borrower personally except in cases of 'bad boy' conduct. Non-recourse is preferred but usually limited to larger stabilized deals.

Typical package: (1) Sponsor financials (PFS, 2-3 years tax returns), (2) Sponsor experience resume, (3) Entity organizational documents, (4) Subject property rent roll, (5) Operating statements (2-3 years), (6) Pro forma with assumptions, (7) Purchase contract, (8) Environmental records if available, (9) Leases or lease abstracts, (10) Business plan for value-add or development. Expect 50-100+ pages total.

Yes — NNN single-tenant net lease properties are among the easiest commercial deals to finance. Investment-grade tenants (Walgreens, CVS, AutoZone, Dollar General) support 70-75% LTV with favorable rates. Many lenders specialize in NNN including private banks, credit unions, life companies, and specialty NNN lenders. Expect 45-60 day close.

A commercial mortgage broker shops your loan to multiple lenders to find the best terms. They have access to 20+ capital sources across banks, CMBS, SBA, bridge, and life companies. A direct lender lends their own money from a single source. Brokers charge origination fees (0.5-1% of loan amount) but typically find better terms than you would directly. Best for complex or specialized deals.