Property Type
The building’s use, condition, location and marketability influence eligibility, valuation and financing terms.
Finance property with a business purpose
Commercial Real Estate Financing
Commercial real estate financing can support the purchase, refinance or improvement of eligible business and investment properties. The right structure depends on the property, occupancy, operating income, borrower or guarantor strength, available equity and complete transaction.
29 years of mortgage experienceProperty-focused analysisComplete financing comparisons
The short answer
What Is a Commercial Real Estate Loan?
A commercial real estate loan is financing secured by property used primarily for business or investment purposes. Examples may include office, retail, industrial, mixed-use, multifamily and certain special-purpose properties, subject to the selected program.
Unlike a typical residential mortgage, the analysis may place substantial weight on the property’s net operating income, leases, occupancy, expenses and market position. The business, borrowing entity, sponsors and guarantors may also be evaluated.
Commercial is a broad category—not a single loan product.Rates, terms, amortization, recourse, reserves, reporting and closing requirements depend on the property, borrower, lender and complete transaction.
Build the complete analysis
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Six Factors That Shape Commercial Financing
A change in property performance, occupancy or structure can affect the available loan amount, terms and required equity.
Occupancy and Leases
Tenant quality, lease terms, vacancy and rollover risk help define the stability of property income.
Operating Performance
Income and reasonable operating expenses are reviewed to determine the property’s net operating income.
Borrower Strength
Experience, liquidity, credit, financial capacity and the ownership structure may be evaluated.
Equity and Reserves
The borrower’s contribution, existing equity, closing funds and post-closing reserves affect the structure.
Loan Purpose
Purchase, refinance, cash-out, renovation and construction requests can follow different requirements.
Start with how the property is used
Owner-Occupied and Investment Properties Serve Different Plans
The source of repayment and operating strategy help determine which commercial path may fit.
The operating business uses the property
Owner-Occupied Commercial
- The borrower’s business occupies a meaningful portion of the property
- Business cash flow may support repayment
- Operating history and financial statements may be reviewed
- Property suitability for the business is considered
- Program and occupancy requirements vary
The property is held for income
Commercial Investment Property
- Tenant rent and property operations support repayment
- Leases, vacancy and market rents are analyzed
- Net operating income is a central measure
- Sponsor experience and liquidity may be important
- Future lease rollover and capital needs are considered
Review the complete property
Look Beyond Purchase Price and Interest Rate
- Current rent roll and lease terms
- Historical and projected operations
- Vacancy and tenant rollover
- Property taxes, insurance and utilities
- Repairs, management and capital needs
- Appraisal and market conditions
- Environmental and property reports
- Loan term, amortization and maturity
A simplified property view
Start With Net Operating Income
Gross Operating Income − Operating Expenses
= estimated net operating income
= estimated net operating income
This is a simplified planning illustration. The lender determines acceptable income, expenses and adjustments under the selected program.
Measure the repayment cushion
Debt-Service Coverage Connects Income to Payment
Debt-service coverage compares qualifying property income with the required debt payments. The precise calculation and minimum standard vary by lender, property and program.
- Confirm which rent and other income are accepted.
- Review normalized operating expenses and reserves.
- Account for vacancy and collection assumptions.
- Compare proposed annual debt service with property income.
- Stress-test changes in rent, vacancy, expenses and interest rate.
Match the financing to the asset
Commercial Property Types Require Different Reviews
Availability depends on the specific property, market, tenancy, operating history and lender requirements.
Office and Retail
Tenant mix, lease rollover, local demand, access and the property’s competitive position may be reviewed.
Industrial
Clear height, loading, layout, location, tenant requirements and alternate uses can influence the analysis.
Multifamily
Unit mix, rents, occupancy, operating history, condition and market supply help determine property performance.
Mixed or Special Use
Properties with multiple uses or specialized improvements may require additional market and operational review.
Compare the complete structure
Questions to Ask Before Choosing a Commercial Loan
How Long Is the Loan?
Review the maturity, amortization schedule and whether a balloon balance may remain due.
Can the Rate Change?
Understand the initial rate, adjustment terms, index, margin, caps and payment effect when applicable.
What Is Required?
Confirm guarantees, reserves, reporting, covenants, property insurance and other continuing obligations.
What Is the Exit Plan?
Consider repayment, sale or refinance well before maturity and test the plan under less favorable conditions.
The commercial financing process
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From Property Review to Closing
The exact process varies, but a prepared commercial transaction generally follows these connected stages.
Define the Strategy
Identify the property, business purpose, requested amount, ownership, equity and expected timeline.
Review the Financials
Evaluate property operations, leases, borrower or sponsor capacity and supporting documentation.
Compare Structures
Review rate, term, amortization, payment, reserves, recourse, costs and closing requirements.
Complete Due Diligence
Address appraisal, title, insurance, environmental, legal and underwriting requirements before closing.
Continue your research
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Explore Conventional LoansStart with the complete property plan
Ready to Review Commercial Financing Options?
Start with a conversation about the property, business purpose, operating performance, equity and expected timeline.