What Is a Commercial Real Estate Loan?
A commercial real estate loan is long-term financing secured by an income-producing commercial property and repaid over many years from the property's cash flow. It is used for stabilized assets — retail, office, industrial, mixed-use, and similar — and is underwritten primarily on the property's net operating income rather than the borrower's personal income. These are permanent loans, distinct from short-term bridge or hard money financing.
How Do Commercial Real Estate Loans Work?
A commercial real estate loan is sized by the property's ability to cover the payment, measured through the debt-service coverage ratio (DSCR) and debt yield, then capped by a loan-to-value limit. Lenders typically require a DSCR of 1.25x or higher and lend up to 65%–75% of value, so the borrower brings 25%–35% in equity. Terms are long, with amortizations up to 25–30 years, and many executions offer non-recourse structures where personal assets are not on the hook.
Commercial Real Estate Loan Rates & Terms (2026)
Commercial real estate rates for a stabilized property with a strong sponsor commonly range from about 5.5% to 7.5% in 2026, across bank, life-company, agency, and CMBS execution. According to 2026 market data, commercial mortgage rates start near 5.7% for the strongest deals and widen from there by risk. Long-term fixed rates track the 10-year Treasury, so pricing is rate-sensitive and moves with the market. Lower leverage and higher DSCR earn tighter pricing.
Types of Commercial Real Estate Loans
The main permanent commercial real estate loan types are bank loans, CMBS loans, and life-company loans. Bank loans are relationship-driven, flexible, often recourse, and common for smaller or local deals. CMBS (conduit) loans are non-recourse, fixed-rate, and standardized, suited to larger stabilized assets. Life-company loans often carry the lowest rates but are reserved for the highest-quality, well-located properties. Owner-occupied business property is usually financed through SBA loans, and transitional property through a bridge loan.
What Drives Your Commercial Real Estate Loan Rate
Your rate is set by risk, and several factors move it: loan-to-value and DSCR, debt yield, property type, location, lease quality, sponsor experience, and recourse. Property type matters a great deal — multifamily, industrial, and grocery-anchored retail price tighter, while hotels, office, and special-use assets price wider. Non-recourse loans usually price slightly higher than full-recourse, all else equal.
Commercial Real Estate Loan Requirements — Do You Qualify?
Commercial approval depends mainly on the property's income and the sponsor. Lenders generally look for: a stabilized, income-producing property; a DSCR of 1.25x–1.40x depending on asset type; a minimum debt yield, often 7%–10%; leverage within 65%–75% LTV; and sponsor experience, liquidity, and net worth on larger deals. A credit and background review is standard.
Refinancing a Maturing Commercial Loan
Refinancing a maturing commercial loan is one of the most common reasons investors seek financing in 2026, as a large volume of commercial mortgages originated years ago reach maturity. When a loan is coming due or facing a balloon payment, a permanent refinance can replace it — or a bridge loan can buy time if the property isn't yet ready to qualify for permanent debt. Acting before the maturity date widens your options.
Commercial Real Estate Loan vs. Bridge Financing
Choose a permanent commercial real estate loan when the property is stabilized and you want the lowest long-term rate; choose a bridge loan when the property is transitional, vacant, or being repositioned and can't yet qualify for permanent debt. A common path is to bridge a value-add deal, stabilize it, then refinance into a permanent commercial loan.
Pros and Cons of Commercial Real Estate Loans
The main advantages of a commercial real estate loan are low long-term rates, long amortizations, and non-recourse options; the main considerations are that they require a stabilized property, strong DSCR, and documentation, and they move slower than short-term financing. They are built to hold a performing asset, not to fund a transition.
How to Choose a Commercial Real Estate Lender
The best commercial lender depends on your property type, deal size, and recourse preference — a bank, a CMBS lender, and a life company will each price the same deal differently. Bring Capwell the scenario once, and we match the property to the lenders most competitive on that asset so you can compare real terms.
