CRE Financing
Commercial real estate financing provides debt for purchasing, refinancing, or improving income-producing or business-use property. From traditional CRE loans and SBA 504 to bridge and alternative structures, understanding how it works helps borrowers and advisors navigate options.
Businesses often need to acquire or refinance the property they occupy or invest in. Commercial real estate financing enables those transactions. Lenders evaluate the property's value and cash flow, the borrower's credit and liquidity, and the loan structure. Different products fit different situations.
Commercial real estate is a subset of commercial finance. CRE loans are typically secured by the property. Owner-occupied property—where the business uses the space—may qualify for SBA 504 or other owner-user programs. Investment property—where the borrower leases to tenants—may have different product options. Criteria vary by lender; what one approves, another may decline.
Borrowers and their advisors typically consider several financing paths:
The process typically begins with a loan application. The borrower provides property information, financials, and business details. The lender orders an appraisal, reviews credit, and evaluates debt service coverage and loan-to-value. If approved, the lender issues a commitment; the borrower completes due diligence and closes.
For SBA 504, the borrower works with a conventional lender and a CDC (Certified Development Company). The structure typically splits: 50% from the bank, up to 40% from the CDC (SBA-guaranteed), and 10% from the borrower. The property must be owner-occupied. Eligibility depends on business, property, and SBA guidelines. Approval is not guaranteed; each deal is evaluated on its merits.
Property factors. Location, condition, occupancy, net operating income (NOI), and property type. Lenders assess whether the property can support the debt and retain value.
Borrower factors. Credit score, liquidity, experience, and debt service capacity. Lenders want to see that the borrower can manage the property and service the loan.
Structure factors. Loan-to-value (LTV), debt service coverage ratio (DSCR), and term. Lenders have minimum requirements that vary by product and property type.
Criteria differ across commercial lending sources. A deal declined by a bank may be considered by an alternative lender or bridge provider depending on structure and fit.
Owner-occupied purchase with SBA 504. A manufacturer buys the building it currently leases. SBA 504 finances 90% of the project cost. The business occupies the space. The structure may offer longer terms and lower down payment than conventional CRE.
Bank decline, alternative path. A bank declines a CRE refinance due to occupancy, industry, or exposure. The borrower's broker submits to a second look or alternative network. An alternative lender may consider the deal based on different criteria. Each opportunity is evaluated on its merits.
Bridge to permanent. A buyer acquires a value-add property. Bridge financing funds the purchase and improvements. Once stabilized, the borrower refinances into long-term financing. Bridge fills the gap until permanent financing is available.
CRE financing can be declined for many reasons: property condition, occupancy, DSCR, LTV, industry restrictions, or lender exposure caps. A decline from one lender does not mean no options exist. Second look lenders and alternative programs may evaluate CRE deals based on different criteria. Brokers and advisors can submit declined CRE deals through referral networks for review. See options after business loan decline for borrower context.
FAQ
Commercial real estate financing is debt used to purchase, refinance, or improve income-producing or business-use property. It includes traditional CRE loans, SBA 504, bridge loans, and alternative structures. Lenders evaluate the property, borrower, and cash flow. Approval depends on multiple factors.
SBA 504 loans finance owner-occupied commercial real estate. Typically, a conventional lender provides 50%, a CDC provides up to 40% (SBA-guaranteed), and the borrower puts down 10%. The property must be owner-occupied. Eligibility depends on business and property. Not all CRE qualifies.
Bridge financing is short-term debt used to bridge a gap—for example, between purchasing a property and securing long-term financing, or during a value-add strategy. Terms are typically shorter and rates may be higher. See what is bridge financing for more detail.
Lenders evaluate the property (location, condition, occupancy, NOI), the borrower (credit, liquidity, experience), and loan-to-value. Criteria vary by lender and product. Owner-occupied vs. investment property may have different requirements.
A decline from one lender does not mean no options exist. Alternative lenders, bridge lenders, and second look programs may evaluate CRE deals based on different criteria. Brokers and advisors can submit declined CRE deals for review. Each opportunity is evaluated on its merits.
Office, retail, industrial, multifamily, mixed-use, owner-occupied business property, and other income-producing or business-use real estate. Product availability varies by lender. SBA 504 is limited to owner-occupied. Investment property may have different options.
Have a CRE deal?
Brokers and advisors can submit commercial real estate opportunities through the referral network. Review the referral agreement and submit for evaluation.
