Conventional Commercial Real Estate Loans

Conventional commercial financing is the permanent-debt path for stabilized income property. It is not a single product; it is a category of lender programs that share a common expectation: the property's documented income should comfortably cover the proposed debt, and the borrower should have the liquidity and experience to operate it.

We place conventional commercial loans with wholesale lenders, banks, and credit unions whose appetite matches the asset. Terms vary by lender, property, borrower, and transaction.

Program overview

Conventional commercial loans are typically secured by a first lien on stabilized multifamily, retail, office, industrial, mixed-use, or specialty property. Structures commonly include a five-, seven-, or ten-year term amortized over twenty-five or thirty years, with fixed or adjustable pricing and, on some programs, an interest-only period.

Full documentation is the norm: rent roll, T-12, leases, borrower and guarantor financials, entity documents, appraisal, and third-party reports. Reduced-documentation and DSCR programs exist for some assets, but they are separate products with their own trade-offs, not a shortcut through conventional underwriting.

Who this program fits

Investors and owner-users with stabilized, income-producing commercial property
Borrowers refinancing a maturing balloon or exiting a short-term structure
Sponsors who can document property income, liquidity, and relevant experience
Entities purchasing or holding commercial real estate for a long-term hold
Owners who want predictable permanent debt rather than a bridge facility

Eligible property types

Multifamily — five-plus-unit apartment properties
Mixed-use — residential and commercial space in one building
Retail — strip centers, neighborhood centers, and single-tenant retail
Office — professional, medical, and general office buildings
Industrial — warehouse, distribution, flex, and light-manufacturing space
Automotive and specialty — service properties, car washes, and self-storage

Eligible loan purposes

Purchase. Acquisition financing for a stabilized asset with a documented income history.
Rate-and-term refinance. Replacing existing debt without taking meaningful cash out.
Cash-out refinance. Releasing equity subject to tighter leverage and seasoning requirements.
Owner-occupied purchase or refinance. Where the business occupies the property and both the real estate and the business are underwritten.

Stabilized net operating income

The lender normalizes the operating statement: applies its own vacancy factor, deducts a market management fee even if the owner self-manages, adds replacement reserves, and may adjust property taxes to a post-sale assessment. The resulting NOI is the basis for coverage, value, and loan sizing.

Coverage, leverage, and debt yield

Debt service coverage ratio compares NOI to annual principal and interest. Loan-to-value compares the loan to the appraised value, using the lower of price or value on a purchase. Debt yield compares NOI to the loan amount. Each lender sets its own thresholds, and the tightest test governs the loan amount.

Borrower and property quality

Credit, liquidity after closing, net worth, and experience are reviewed alongside property condition, occupancy, lease rollover, tenant concentration, and environmental history. A property that clears coverage can still be declined for condition, title, zoning, or a thin market with no credible comparables.

Property income and occupancy

A current rent roll, a trailing twelve-month operating statement (T-12), copies of executed leases or a representative sample, and an aged receivables report. Lenders use these to verify the income they are underwriting rather than the income described in an offering summary. A rent roll that does not reconcile to the operating statement is one of the most common reasons a file stalls.

Borrower, guarantor, and entity documentation

A personal financial statement and schedule of real estate owned for each guarantor, typically two years of personal and business tax returns, two to three months of bank statements, and the borrower entity's formation documents, operating agreement, EIN confirmation, and certificate of good standing. Where ownership is layered, expect an ownership org chart and authority documents for each level.

Third-party reports and closing items

The lender orders the commercial appraisal, and depending on the property and program, a property condition assessment and a Phase I environmental site assessment. These are borrower-paid and largely non-refundable once ordered. Title commitment, survey, insurance evidence or a bindable quote, and lender legal review complete the closing file.

Benefits

Permanent debt with predictable terms on stabilized assets
A broad lender pool across banks, credit unions, and wholesale conduits
Fixed-rate options and longer amortization schedules
Entity borrowing is standard
Refinance and cash-out paths as equity and performance grow

Limitations and risks

Full documentation is required; reduced-doc structures are a different product
Stabilized income and coverage minimums limit leverage on transitional assets
Prepayment penalties and defeasance can restrict an early sale or refinance
Third-party reports and lender legal review add time and cost
Lender appetite varies sharply by property type and market

Example Transaction (Illustrative and Hypothetical)

Hypothetical illustration — not a real transaction

This example is hypothetical and is not a quote or a real transaction. An investor purchases a stabilized 12,000-square-foot retail building for $2,400,000 with a $1,680,000 loan at 70% LTV. Normalized NOI is $151,200. Assuming annual debt service of $120,960 solely to demonstrate the arithmetic, DSCR is 1.25x and debt yield is 9.0%. The file clears the hypothetical lender's coverage and leverage tests. No rate, payment, or term is expressed or implied.

Common reasons a deal may not qualify

The property is transitional, materially vacant, or dependent on projected income
Documented NOI does not support the requested loan at the lender's minimum coverage
The borrower lacks post-closing liquidity or relevant ownership experience
Environmental, condition, title, or zoning issues remain unresolved
The asset is in a thin market without credible sales or lease comparables

Alternative structures

Reduce leverage or bring additional equity
Use a bridge structure until the property stabilizes, then refinance
Add a guarantor or accept recourse to broaden lender appetite
Consider a DSCR or reduced-documentation program where the asset fits

Related property types

Related calculators

Frequently asked questions

Is a conventional commercial loan the same as a bank loan?

Not necessarily. Banks are one source of conventional commercial debt, but wholesale lenders, credit unions, and other capital sources also offer conventional programs. The common thread is stabilized property, full documentation, and property-level coverage requirements. We match the file to the lender whose appetite fits it.

Can I get a fixed rate?

Fixed-rate structures are available on many conventional commercial programs, especially for stabilized assets. Whether a fixed rate is offered, and for how long, depends on the lender, the property, the loan size, and the market. Adjustable structures and interest-only periods are also available on some programs.

What determines the terms I am offered?

The lender sets terms after reviewing the property, the borrower, and the transaction. Property type, occupancy, net operating income, debt service coverage, leverage, loan purpose, loan size, term and amortization, recourse, prepayment structure, sponsor experience, credit, and liquidity all move the quote. Two lenders can reach different conclusions on the same file. Terms vary by lender, property, borrower, and transaction, and nothing here is a rate quote or a commitment to lend.

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Terms vary by lender, property, borrower, and transaction.

Information provided is for general educational purposes and does not constitute a commitment to lend. Programs, terms, rates, loan amounts, documentation requirements, and eligibility vary by lender, property, borrower, and transaction. All financing is subject to underwriting, appraisal, title review, due diligence, and lender approval.