Commercial real estate loans
A loan secured on business property, to buy, build or refinance the building you trade from or one you rent out. Long-term money at a lower risk to the lender than most business loans, but you need a deposit, and many loans end with a large final payment you must refinance.
- Secured on assets
How it works
A commercial real estate (CRE) loan is secured by a mortgage on nonresidential property: offices, shops, warehouses, factories, or buildings you rent to tenants. The Office of the Comptroller of the Currency (OCC) groups them by how they are repaid: from your business's own earnings when you occupy the building, or from rent when you lease it to others.
How much you can borrow: bank regulators expect banks to set their own loan-to-value (LTV) limits within supervisory ceilings: 85% of the value of a finished commercial property, 80% for commercial construction, 75% for land development and 65% for raw land. So expect to put in at least 15% to 35% yourself. Banks can make exceptions, but must track them.
What lenders look at: the property's value, from an appraisal by a state certified or licensed appraiser for most loans over $500,000 (business loans of $1 million or less that do not depend on rent or a sale of the property can use a simpler evaluation); the debt service coverage ratio, which is the property's net operating income, or your business's cash flow, divided by the yearly loan payments; and, for buildings you occupy, the strength of your business.
How it is repaid: some loans have, for example, a five-year term with payments worked out as if over 20 years, leaving a large final payment (a balloon) to repay or refinance. The OCC warns that if the property's value falls, a borrower can find it hard to refinance that balloon. Long-term fixed-rate loans of 10 years or more from life insurers, pension funds and securitized lenders are commonly nonrecourse: the lender can look only to the property, not to you, except in set circumstances.
SBA options: the SBA 504 loan finances real estate for the business's own use with a Certified Development Company and a bank, and SBA 7(a) loans can run for up to 25 years for real estate.
Read the commitment for: the rate and when it can change, the term and any balloon, prepayment penalties, whether you or the owners are personally liable (recourse), covenants on the debt service coverage ratio, and the costs of the appraisal, environmental report, title and legal work.
Upsides and downsides
Upsides
- Long repayment schedules keep each payment lower
- You can borrow a large share of the property's value, up to 85% of a finished building under the supervisory limits
- Long-term fixed rates are available from insurers and other long-term lenders
Downsides
- You need a deposit, and pay for the appraisal, environmental report and legal work
- Many loans end in a balloon payment that must be refinanced
- The property is tied up as security, and selling it means repaying the loan
Risks
- If the property's value falls, you may be unable to refinance the balloon
- If tenants leave or your business struggles, missed payments can lead to foreclosure
- Variable-rate loans cost more when rates rise
What it costs
- How it is priced
- Interest set by the lender, fixed or variable, based on the property, your business and the loan-to-value
- Costs that are easy to miss
- Appraisal, environmental report, title insurance and legal fees, usually paid by you
- Prepayment penalties, where the loan has them
- Refinancing costs at the balloon, at whatever rates apply then
Up to the bank's loan-to-value limit, within supervisory ceilings of 85% for a finished commercial property and 80% for construction.
Have a quote? True cost of a loan: work out the APR and total cost
Does it fit?
Could fit when
- You want to buy, build or improve a commercial building
- You own commercial property and want to refinance or release cash from it
Unlikely to fit when
- You neither need property nor own any to borrow against
- The business has traded for less than two years, so lenders have little record to judge
- You need the money within weeks
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative, Nonprofit
- Needs sales (revenue)
- A deposit or equity in the property, often 15% or more of its value
- Rent or business cash flow that covers the loan payments with room to spare
- A property that appraises at or above the price, with clean title and no serious environmental problems
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all bank and mainstream debt
0%
0 of 4 ticked
- Property details
- Financial statements
- Personal financial statements
Regulation and protections
Regulators: Office of the Comptroller of the Currency (OCC); Federal Deposit Insurance Corporation (FDIC); Federal Reserve; National Credit Union Administration (NCUA).
Who runs it: Private providers, nationwide.
Banks and credit unions that make CRE loans are supervised by their regulators, which set the appraisal rules and the supervisory loan-to-value limits. Federal Truth in Lending rules (Regulation Z) do not cover business loans. The Equal Credit Opportunity Act (Regulation B) covers business credit. State commercial financing disclosure laws do not cover loans secured by real property; see below.
Rules that differ by state
- California, New York, Utah, Florida, Georgia, Kansas, Missouri: The state's commercial financing disclosure law does not cover financing secured by real property, so a commercial real estate loan comes without its cost disclosure. Ask the lender for the rate, fees and total cost in writing. (California Financial Code, Division 9.5: Commercial Financing Disclosures (sections 22800 to 22807); New York Financial Services Law section 802: exemptions; Utah Code 7-27-102: application of the Commercial Financing Registration and Disclosure Act; Florida Statutes 559.9612: scope of the Florida Commercial Financing Disclosure Law; Georgia SB 90 (2023), as passed (Act 78): O.C.G.A. 10-1-393.18(b); Kansas Statutes 75-785: exceptions to the Commercial Financing Disclosure Act (2024); Revised Statutes of Missouri 427.300: Commercial Financing Disclosure Law)
Types of provider: Banks and credit unions; Life insurance companies and pension funds; Securitized (CMBS) lenders.
Also consider
What has changed
No changes since this page was published. It was last checked against its sources on October 20, 2026.
Sources
- OCC Comptroller's Handbook: Commercial Real Estate Lending (version 2.0, March 2022): loan types, supervisory LTV limits, amortization and DSCR · checked October 20, 2026
- 12 CFR 34.43: appraisals required (thresholds for commercial real estate and business loans) · checked October 20, 2026
- SBA: 504 loans · checked October 17, 2026
- 12 CFR 1026.3 (Regulation Z): exempt transactions, including business credit · checked October 17, 2026
Something wrong or out of date?
Every fact here comes from a source, and rules and limits change. Email what looks wrong to data@fundladder.uk and, if you can, where you saw the right information. We use your email only to check the correction and reply. Privacy