Nine product families cover nearly every commercial real estate financing options scenarios an investor or developer will face: conventional/permanent bank loans, SBA 7(a), SBA 504, CMBS/conduit loans, life-company loans, bridge loans, construction loans, mezzanine financing, and private hard-money loans, with DSCR-based loans layered across several of these for cash-flowing investment property. Your choice among them comes down to three questions: what you’re doing with the money, how fast you need it, and how strong your deal looks across the Property, Business, and Sponsor test lenders apply to every file.
Here’s how the major categories sort by purpose:
The sections below walk through typical loan sizes and terms, how underwriters actually score a deal, a step-by-step way to pick the right product, and what closing really costs and takes in calendar days.
Choosing the right commercial real estate financing option comes down to matching purpose, timing, and deal strength to the product built for that combination.
| Point | Details |
|---|---|
| Purpose drives product | Acquisition, construction, and refinance/cash-out each point to different loan families; don’t force a fit. |
| DSCR caps loan size | A DSCR minimum of roughly 1.20x to 1.35x often limits principal below what the appraisal alone would support. |
| Occupancy decides SBA fit | SBA 504 requires 51%+ owner occupancy and restricts cash-out refinancing under federal rules. |
| Speed has a price | Bridge and hard-money loans close in days to weeks but carry higher rates than permanent debt. |
| Capital Funding fills the speed gap | As a direct private lender with over $1 billion in closed loans, Capital Funding closes hard money and construction loans fast for deals banks decline. |
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
Loan size, term length, and rate spread vary more across CRE products than most first-time borrowers expect. A life-company loan and a hard-money loan might both be “commercial real estate loans,” but they serve opposite ends of the speed-versus-cost spectrum.
| Loan Type | Typical Max Loan Size | Term/Amortization | Typical Rate Range | Typical LTV/Down Payment |
|---|---|---|---|---|
| Conventional/permanent bank | $1M–$20M+ | 5–10 yrs term, 20–25 yrs am. | Prime plus a spread | 65% LTV |
| SBA 7(a) | Up to $5M | Up to 25 yr | Base rate plus lender spread | 10% down |
| SBA 504 | CDC portion up to $5.5M | 10, 20, or 25 yr debenture | Fixed, CDC-set | 10–20% down |
| CMBS/conduit | $2 million and up | 5, 7, or 10 yr, interest-only options | Spread over swaps/treasuries | 65% LTV |
| Life company | $5 million and up | 5 years, longer amortization | Among the lowest available | 50–65% LTV |
| Bridge | $500,000 and up | up to 24 months | Higher than permanent debt | 65% LTV |
| Construction | $500,000 and up | interest-only during construction | Floating, higher spread | about 60% of cost |
| Mezzanine | Fills gap above senior debt | Matches senior term | High, often double-digit | Brings combined LTV to about 80% |
| Private/hard-money | $100,000 and up | up to 24 months | Highest in the category | about 60% ARV/LTV |
Two decision rules cut through most of this table fast. If speed is the binding constraint, bridge and hard-money products are the only lanes that can close in days rather than months.
Note the fine print on SBA 504: the occupancy rule requires the borrower’s own business to occupy the majority of the property, and nearly every product on this list requires a personal guarantee from the sponsor unless the borrower is an exceptionally strong institutional entity.
A conventional commercial mortgage is the default choice for stabilized, income-producing property with a clean operating history. Banks and credit unions typically offer the sharpest rates in the market, but they also carry the strictest documentation and reserve requirements, which is part of why banks close slower than alternative lenders even when their pricing wins.
Next step: bring three years of tax returns and a current rent roll to your relationship banker before shopping elsewhere.
The 7(a) program works for owner-occupied commercial property when the business itself, not just the real estate, drives the underwriting. Down payments commonly run in a low double-digit percentage range, well below conventional norms.
A medical practice buying its own building for $2 million might use 7(a) to finance both the real estate and leasehold improvements in a single loan. Next step: gather two years of business tax returns and a debt schedule before applying.
SBA 504 pairs a bank loan with a Certified Development Company debenture that can fund up to $5.5 million on eligible projects, with terms of 10, 20, or 25 years at a fixed rate set by the CDC. This structure is purpose-built for buying or building owner-occupied property and major equipment, not for cash-out strategies.
CMBS loans get pooled and sold as bonds, which means pricing depends on capital markets rather than a single bank’s balance sheet. They fit larger stabilized assets, often $5 million and up, where the borrower can tolerate rigid servicing and prepayment structures.
Next step: model your expected hold period against the defeasance schedule before you sign, since exiting early can cost more than the interest you’d save.
Insurance companies lend against trophy or near-trophy stabilized assets, generally at lower leverage but with some of the most competitive rates in commercial lending. This is patient, low-risk capital chasing long-term, low-volatility cash flow.
Next step: this lane is worth pursuing only once a property has a multi-year stabilized operating history and institutional-quality tenancy.
Bridge financing exists to cross a gap: buying before permanent financing is arranged, repositioning a property before it qualifies for a conventional refinance, or beating a closing deadline a bank can’t meet.
A value-add office building bought at a discount because of vacancy might use a 24-month bridge loan to fund renovation and lease-up before refinancing into permanent debt. Explore commercial bridge loan structures when your timeline is the binding constraint, not the rate.
Ground-up construction financing funds the building of a project from the ground up, disbursed in draws tied to completed work rather than as a single lump sum.
Next step: line up a detailed cost breakdown and a contractor with a track record before approaching a construction lender, since underwriting weighs the builder almost as heavily as the sponsor.
Mezzanine debt sits between senior debt and equity, filling the gap when senior financing alone won’t cover the capital stack. It’s more expensive than senior debt but cheaper than raising additional equity financing for real estate.
Next step: only layer mezzanine capital onto a deal where the senior lender permits it and the combined debt service still pencils against projected NOI.
Private lenders underwrite primarily against the asset and the sponsor’s plan, not a stack of tax returns, which is why these loans close in days rather than weeks.
Next step: have your renovation budget and comparable sales ready before your first call.
DSCR loans qualify the property on its own income rather than the borrower’s personal tax returns, which makes them a favorite among investors scaling a rental portfolio.
Next step: run your own DSCR math before applying. Our guide on how to qualify for a DSCR loan walks through the calculation lenders use.
Refinancing swaps existing debt for new terms, and cash-out refinancing pulls equity out of a stabilized property. Conventional and bridge products handle this cleanly; SBA 504 does not, since 504 refinancing is restricted under federal rules governing qualified debt. Next step: confirm your post-refinance DSCR clears the lender’s minimum before you commit to a cash-out target number.
Every commercial deal gets scored against three overlapping questions: does the property generate enough income to cover the debt, is the business operating on the property stable enough to sustain that income, and does the sponsor have the net worth and liquidity to backstop the loan if something goes wrong? Underwriters call this the Property–Business–Sponsor triad, and where the weight falls shifts by product. An investment-property DSCR loan cares almost entirely about the property. An SBA 7(a) loan for an owner-occupied practice weighs the business heavily. Every product cares about the sponsor.
The metrics that translate this triad into a yes or no:
Statistic: Underwriters commonly set a minimum DSCR of 1.20x to 1.35x for stabilized investment property, meaning net operating income must exceed annual debt service by at least 20% to 35% before a loan gets approved.
Here’s a worked example. Maximum allowable annual debt service equals $180,000 divided by 1.25, or $144,000. If the appraised value supports a higher LTV than the DSCR math allows, DSCR wins and caps your loan size. This is the single most common reason a deal that “looks fine” on paper gets sized down at the term sheet stage. Lenders weighing approval factors apply this same logic across nearly every commercial mortgage solution, not just DSCR-specific programs.
Work through this sequence before you contact a single lender:
Build your application packet in parallel with that decision:
Come to your first lender conversation with pointed questions: Is the rate fixed or floating, and for how long? What’s the prepayment penalty structure? What reserves will you require at closing? Are there financial covenants I need to maintain over the loan term?
Any one of these can stall or kill a deal after you’ve already paid for an appraisal.
Fees stack up before you ever make a first payment. Expect some combination of origination points, appraisal fees, survey costs, environmental report fees, legal costs, and, for SBA loans, a government guarantee fee layered on top of standard closing costs.
CMBS and life-company loans carry a different kind of cost risk: defeasance or yield-maintenance penalties on early payoff. These structures can make an early sale or refinance dramatically more expensive than the interest you’d save, so model your likely hold period against the prepayment schedule before you sign, not after.
Pro Tip: If you need speed today but expect to refinance into cheaper permanent debt within a year, don’t force yourself into a long-term product just to avoid a bridge loan’s higher rate. A well-structured bridge with no prepayment penalty often costs less over eighteen months than a permanent loan you’ll break early.
Most of this article has walked through the standard menu: banks, SBA programs, CMBS, life companies. Each has a real place. But there’s a category of deal where none of them fit well, and that’s where a direct private lender earns its higher rate.
Speed is the clearest case. If you’re competing for a property against an all-cash buyer, or a seller has given you 10 days to close, no bank underwriting committee is going to save that deal. Nonconforming collateral is another. A ground-up construction project with an unusual cost structure, a property that doesn’t fit a standard appraisal comparable set, or an ultra-luxury single-family home priced well above what most institutional lenders will touch, all of these need a lender willing to underwrite the deal in front of them rather than force it into a standard box.
Capital Funding operates as a direct lender backed by a family office, which is part of why it can close hard money loans in days rather than months. Its track record includes over $1 billion in closed loans and an A+ BBB rating, and its willingness to finance projects other lenders decline, including ultra-luxury single-family homes over $10 million, reflects the kind of flexible underwriting that speed-driven or nonconforming deals require. That’s not a claim that private lending beats a bank on rate. It doesn’t, and it isn’t meant to. It’s a different tool for a different problem.
If your deal needs speed, flexibility, or a lender willing to look past a standard checklist, Capital Funding is built for exactly that gap between what banks can offer and what your timeline actually demands.
As a direct private lender backed by a family office, Capital Funding closes hard money loans in days, not months, and finances projects many conventional lenders won’t touch, including ground-up construction with nontraditional cost elements and ultra-luxury single-family homes over $10 million. A few programs worth a direct conversation:
Capital Funding has closed over $1 billion in loans and holds an A+ BBB rating, backed by a direct-lender structure that skips the layers of committee approval a bank requires. If you have a deal on the clock, reach out to a loan officer and have your purchase contract or scope of work ready. That single document is usually enough to get a term sheet started.
Lenders commonly evaluate character, capacity, collateral, and capital, which map closely onto the Property–Business–Sponsor triad underwriters use to score a commercial loan file.
Timelines range from days for hard-money and bridge loans up to 60 to 90 days for SBA 504 loans, since 504 involves parallel underwriting by a bank and a Certified Development Company.
Use a bridge loan when your timeline is shorter than a bank can accommodate or your property isn’t yet stabilized enough to qualify for permanent financing; lenders like Capital Funding can close bridge loans in days when speed is the deciding factor.
