What Is Commercial Real Estate Financing?

What Commercial Real Estate Financing Is

Commercial real estate financing, often shortened to CRE financing, is a loan used to purchase, build, refinance, or improve property used for business purposes. That covers a wide range: an office, a warehouse, a retail storefront, a multifamily building, a restaurant, or a piece of land you plan to develop.

There are two broad reasons businesses borrow against commercial property:

Owner-occupied: You operate your business out of the property. Lenders generally view this as lower risk, because your business income supports the loan directly.

Investment: You buy the property to lease it to tenants. Here the lender underwrites the property's rental income closely, since that income repays the loan.

The category includes several loan types: conventional bank loans, SBA 504 and SBA 7(a) loans, bridge loans for short-term needs, and construction loans for ground-up projects.

How Commercial Real Estate Financing Works

A CRE loan is secured by the property itself, which serves as collateral. That security is why rates run lower than unsecured business debt, and why the lender scrutinizes the asset so carefully.

Two numbers drive most CRE deals:

Loan-to-value (LTV): The loan amount as a percentage of the property's value. Lenders commonly finance 65% to 80% LTV, meaning you bring a 20% to 35% down payment. Owner-occupied SBA loans can go higher, sometimes financing up to 90%.

Debt service coverage ratio (DSCR): The property's net operating income divided by its annual loan payments. Lenders typically want a DSCR of 1.25 or higher, meaning the property earns at least 25% more than its debt costs.

A common wrinkle: many commercial loans amortize over a long period, say 25 years, but include a balloon. Here is what that means. Your monthly payment is calculated as if you will repay over 25 years, which keeps the payment manageable, but the full remaining balance comes due after a shorter term, often 5 to 10 years. At that point you refinance or sell.

A concrete example: you buy a $1M property at 75% LTV, so you borrow $750,000 and put down $250,000. At a 7% rate amortized over 25 years, your monthly payment runs near $5,300, with a balloon balance due at the end of a 7-year term that you refinance when it arrives.

What You Can Use Commercial Real Estate Financing For

CRE financing covers the full lifecycle of business property:

Buying the building your business operates from.

Acquiring an investment or rental property.

Refinancing an existing commercial mortgage for a better rate or to pull out equity.

Funding ground-up construction or a major renovation.

Purchasing land for future development.

Acquiring multifamily, retail, office, industrial, or mixed-use properties.

Requirements and How to Qualify

CRE lenders underwrite both you and the property. Expect them to look at:

The property: Its value, condition, location, and, for investment deals, its income and occupancy.

Down payment: Typically 20% to 35% of the purchase price, lower for SBA owner-occupied loans.

Credit: A personal credit score in the high 600s or above for the best terms.

Time in business and revenue: Stronger operating history opens better pricing.

DSCR: The property's income should comfortably cover the loan payments.

Common documents: 1 to 2 years of business tax returns, business bank statements, a P&L and balance sheet, the property's financials and a rent roll for investment deals, a purchase agreement or appraisal, government ID, and business entity documents. Larger deals often require an environmental review and a formal appraisal.

What Commercial Real Estate Financing Costs: Rates, Terms, and Fees

As of June 2026, with the U.S. Prime rate at 6.75%, commercial real estate rates start around 5.6% to 7%+ and range upward depending on the asset type, your leverage, and your credit. Strong owner-occupied deals price near the low end, while higher-risk or higher-leverage deals can reach into the low double digits.

SBA options often offer attractive terms for owner-occupied property. SBA 504 loans run roughly 6% to 7.5%, with the 7(a) program at roughly 9% to 11.5% APR, financing up to $5M on the 7(a) and up to about $5.5M on the 504.

A few structural points:

Loan amounts: commonly $100K to $10M+.

Terms: 5 to 25 years, often with a balloon and amortization split as described above.

Fees: appraisal, environmental review, title, and origination costs are typical on commercial deals. A transparent lender itemizes them up front.

Rates move with the market and vary widely by property type and deal structure, so treat every figure here as a starting range.

Pros and Cons

Where it shines: Lower rates than unsecured debt, long amortization that keeps payments manageable, and the chance to build equity in an asset you control instead of paying rent. For an owner-occupied business, it can turn a monthly expense into a long-term asset.

Where it bites: Large down payments, a slower and more document-heavy process, and balloon structures that put refinancing risk on the calendar. If rates are higher when your balloon comes due, your refinance costs more. CRE rewards patient, well-capitalized borrowers.

Who Commercial Real Estate Financing is Best for (and Who Should Look Elsewhere)

It fits established businesses ready to own rather than rent, investors acquiring income-producing property, and owners refinancing to a better rate or to access equity. If you have the down payment and a property that pencils out, the long-term economics are usually compelling.

Look elsewhere if you need money fast for operations, if you cannot cover the down payment, or if the property's income will not comfortably service the debt. Short-term cash needs belong with working capital products, not a 25-year mortgage.

How to Get Commercial Real Estate Financing Through Quordx

Quordx Capital is a funding brokerage, not a lender, and it is always free to you. There are no application, broker, or processing fees, ever. You apply online in about 10 minutes, and Quordx Capital reads your profile and matches you to 3 to 7 best-fit lenders from a network of 50+ vetted partners, then submits your package on your behalf. Lender decisions typically come back in 24 to 48 hours, with funding in as little as 3 to 7 business days. Quordx Capital serves SMBs in 46 states. It does not currently serve California, Nevada, North Dakota, or South Dakota.

Frequently Asked Questions

How much down payment do I need?: Usually 20% to 35% of the purchase price. SBA owner-occupied loans can require less, sometimes financing up to 90% of the property value.

What credit score do I need for a CRE loan?: The best terms generally go to borrowers with personal credit in the high 600s or above, but the property's value and income carry significant weight too.

What is a balloon payment?: Your payments are calculated over a long amortization, often 25 years, but the remaining balance comes due after a shorter term, often 5 to 10 years, when you refinance or sell.

Can I finance an investment property, not just my own building?: Yes. Lenders underwrite investment deals closely on the property's rental income and DSCR, while owner-occupied deals lean more on your business income.

How long does CRE financing take to close?: Initial decisions often come in 24 to 48 hours, though full commercial closings involve appraisal and review and take longer than other products. Funding can follow in as little as 3 to 7 business days once everything clears.

Commercial real estate financing is a long-term commitment with long-term rewards: lower rates, real equity, and control over the space your business depends on. Match the structure to your goal, keep the balloon timeline in view, and the math tends to favor ownership. The clearest way to see your options is to compare what actual lenders will offer on your deal.