The Most Common Types of Commercial Real Estate Loans

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Commercial real estate loans are for purchasing real estate property such as office space, retail space, or apartment buildings to lease out to tenants. You can take out a real estate loan of up to $5.5 million in most cases with interest rates beginning around 5%. Repayment terms can vary, but can usually extend up to 25 years.

It is important to know that loan-to-value (LTV) ratios of property loans are generally 65%-75%, which means the down payment will be at least 25% of the purchase price. Read on for a breakdown of the most used CRE loans and what to keep in mind when seeking commercial real estate lending.

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Benefits of Commercial Real Estate Financing

There are several benefits to taking out a commercial real estate loan. The most important advantage is establishing ownership of the property with a small down payment, with the ability to collect rental income and build equity over the long term. 

Often you have lower interest rates along with fixed monthly payments to help you plan for upcoming expenses. You can pay for your commercial mortgage over years, which helps you focus on important business details without stress.

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Benefits of Using OPM

Investing with OPM, or other people’s money, can unlock several benefits. By investing with other people’s money, you have the potential to make more without spending all of your own money. 

Earning a return on investment, or an ROI is the ultimate goal when investing in commercial real estate. Using OPM finance can drastically increase your cash return on an investment.

What is Leverage?

Leverage is when you use borrowed capital to increase the return on your real estate investment. While leverage can provide excellent returns, it can also lead to loss if the real estate industry enters a downward cycle. Staying abreast of macro and local commercial real estate trends can keep you aware of what the future may bring.

What are the Common Types of Commercial Real Estate Loans?

There are several types of commercial real estate loans you can apply for. Some of the most common ones include SBA, permanent, hard money, blanket, and bridge loans.

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SBA Loans

There are two types of business loans that the SBA (United States Small business Administration) provides for commercial real estate financing: SBA 7(a) and SBA 504.

Before applying for an SBA loan, you will need to make sure you have the following:

Business PlanGood CreditKnow the Amount You NeedCollateral
You will need to provide your lender with a business plan when you apply. The SBA’s website has a free business plan guide.Lenders will look at your credit history to find out your credit risk and interest rates.You need to know how much money you will need and how an SBA loan will benefit your company. You will also need to show how you will use the funds and how you will pay for the loan.Often, you will need to provide your home or other types of collateral to take out a loan.

SBA 7(a)

Out of the two different SBA loans, the SBA 7(A) is the most popular due to its flexibility. It is usually for longer-term business financing.

The maximum amount you can take out for an SBA loan is usually $5 million. There is also an SBA Express loan with a maximum of $350,000, and SBA Export Express loans have a maximum of $500,000. The maximum maturity for SBA loans for real estate is 25 years.

The borrower and lender negotiate the interest rates, though they need to consider the SBA maximums. According to the SBA website, the chart below shows mortgage rates for variable rate loans:

Loan AmountMax rate if maturity is less than 7 yearsMax rate if maturity is more than 7 years
$25,000 or lessBase rate plus 4.25%Base rate plus 4.75%
$25,000 to $50,000Base rate plus 3.25%Base rate plus 3.75%
$50,000 or moreBase rate plus 2.25%Base rate plus 2.75%

SBA 504

504 loans provide fixed-rate financing of up to $5 million for major fixed assets where business can grow and jobs can be created. An example of these fixed assets would be existing land or buildings. 

You can get a 504 loan through Certified Development Companies known as CDCs. Certified Development Companies are community-based partners that are regulated by the SBA and promote economic growth inside their communities.

When applying for an SBA 504, you will need to show proof that you have management experience, provide a business plan, and qualify as a small business before getting credit approval.


Despite its name, a permanent loan is not unlimited, but it does have an unusually long term. Permanent loans are secured by real estate developers once a construction project is finished, and by investors purchasing existing commercial property for sale. These loans take the place of a construction loan and generally have loan terms of between 5-10 years, with amortization rates of between 20-30 years.

Hard Money

Hard money loans are issued by private companies and individuals instead of by traditional lenders such as banks. This short-term loan is popular with real estate investors who don’t plan on holding onto the property for a long period of time. Hard money loans typically last between three and 36 months.


A blanket loan is used mostly by builders and developers to purchase multiple pieces of real estate at once.

What separates a blanket mortgage from a traditional mortgage is the release clause. The client can sell a piece of property and release their liability for that part of the mortgage. This allows the person to sell the property without repaying the loan in full or having to refinance each time they sell.

Construction workers survey a construction site.


Bridge loans are a short-term financing option often used to cover the gap between a development loan until permanent financing can be secured. These short-term loans usually last between six to twelve months, and have higher interest rates than traditional loans, usually ranging between 8.5% and 10.5%. 

Business Line of Credit

A business line of credit is a less common type of loan used to cover short-term costs. These types of loans do not provide the borrower with a lump sum, so you only pay interest on what you withdraw.

Business lines range anywhere from a couple of months to 10 years with interest rates starting at 7%. The downside is that it can be hard to get a business line of credit with a bank, and online lenders can have interest rates ranging from 8% to 80%. Due to the low availability and high interest rates, a business line of credit should be for extremely short-term needs such as emergency expenses or buying inventory.

a hand holds out a few different types of business credit cards

Where Can You Find Commercial Real Estate Loans?

There are several options to choose from when it comes to finding investment property loans. It is important to thoroughly research your choices and compare commercial loan rates from different lenders.

Commercial Lenders

Commercial lenders offer a handy choice for those who need a real estate loan quickly for their small or medium-sized company. Commercial lenders typically have lower fees and closing costs, but their interest rates are usually higher than loans from banks. Also, most loans from commercial lenders are short-term, so this might not be for you if you are looking for a long-term loan.

Tall buildings stand amid a bridge in the foreground.


Banks provide commercial loans for different kinds of properties, including long-term financing. The standard loan amount for a bank loan is usually $1 million and your bank may provide a discount if you are already a customer.

When taking out a commercial real estate loan with a bank, expect it to be a fairly slow process. You will need to provide ample documentation and the bank will approve or decline your loan based on your credit. If your credit score is less than 620, this might not be a good option for you.

SBA Lenders

Traditional banks can often provide an SBA loan, or you can go through an online lender that offers these types of loans. SmartBiz is a great option, however, the SBA website has a useful lender match tool to help you find a local SBA lender.

The Bottom Line

Investing in commercial real estate property can be a rewarding and enjoyable experience when you are properly prepared. Before you get involved with purchasing any property, you need to figure out a plan for how you are going to pay for your investment. Weigh your options and compare interest rates, costs, requirements, and more with each bank or lender before deciding. 

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Shanti Ryle
Shanti Ryle

Content Marketing Manager

Shanti leads Crexi's content marketing strategies with 7+ years of content development experience, creating everything from blog posts to award-winning podcasts. Previously, she worked on content teams at Snapchat, Weedmaps, and HopSkipDrive as well as developed copy, articles, and media for freelance publications.

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