Last updated: November 2026
Commercial real estate (CRE) financing pays to buy, build or refinance property used for business or rented out for income: offices, retail, warehouses, mixed-use buildings and apartment buildings with 5 or more units. Unlike a home mortgage, a commercial loan is sized mainly on the property's income. Lenders measure it with the debt service coverage ratio (DSCR), net operating income divided by annual loan payments, and most want at least 1.20 to 1.25. The money comes from banks, the government-sponsored agencies (Fannie Mae and Freddie Mac) for apartments, HUD/FHA-insured programs, life insurance companies, CMBS lenders, SBA 504 and 7(a) loans for owner-occupied buildings, and bridge or private lenders for short-term deals. This guide connects our articles on choosing a lender, sizing a loan, apartment financing, refinancing and short-term bridge loans.
Who lends on commercial real estate
The largest CRE lenders in the U.S. are big banks. By CRE loans held on their balance sheets, JPMorgan Chase, Wells Fargo and Bank of America lead, followed by U.S. Bank and PNC. By 2025 origination volume, the Mortgage Bankers Association ranks JLL, JPMorgan Chase, Eastdil Secured, Newmark and Wells Fargo at the top; several of those arrange loans for other capital sources rather than lending their own money. Largest and best commercial real estate lenders profiles the main lenders, matches them to borrower types and covers SBA 504 and 7(a) for owner-occupied property.
| Source | Best for | Trade-off |
|---|---|---|
| Banks and credit unions | Local investors, smaller buildings, construction loans | Shorter terms (often 5 to 10 years) with balloon payments; usually recourse |
| SBA 504 and 7(a) | Businesses buying the building they operate from | Must occupy the property; slower process |
| Fannie Mae and Freddie Mac | Stabilized apartment buildings with solid occupancy | Prepayment penalties; stricter property and sponsor review |
| HUD/FHA-insured loans | Long-term apartment loans, including new construction | Long processing and approval times |
| Life insurance companies and CMBS | Low-leverage or larger stabilized properties | Selective on property and sponsor; CMBS prepayment terms are costly |
| Bridge and private lenders | Value-add, lease-up or quick closings | Higher rates and fees; short terms that must be refinanced |
DSCR: how lenders size the loan
The DSCR formula is net operating income divided by total debt service. A DSCR of 1.0 means income exactly covers the payments; 1.25 means $1.25 of income for every $1.00 of payments. Most lenders want at least 1.20 to 1.25, and the SBA requires 1.15 for standard 7(a) loans and 1.25 for most business purchases. Run the formula backwards and you get the largest loan the property's income can support. What is DSCR? works through three examples, requirements by loan type and ways to improve the ratio, with a DSCR calculator in the post.
Owner-occupied vs. investment property
Lenders treat a building your business operates from differently from one you rent out. If the business occupies the property, SBA loans are an option: a 504 project is usually split about 50% from a bank first mortgage, up to 40% from an SBA-backed Certified Development Company at a long-term fixed rate tied to 10-year Treasury yields, and at least 10% from the borrower, and the business must occupy at least 51% of an existing building. Investment property, including apartment buildings held as rentals, cannot use SBA 7(a) or 504 loans, so it relies on banks, agency, HUD, life company, CMBS or bridge financing sized on the property's own income.
Financing an apartment building
Buildings with 5 or more units are financed as commercial real estate, so the lender looks first at the property's net operating income, not your personal income. Developers who build usually combine a bank construction loan or a HUD 221(d)(4) loan with their own equity, then refinance into permanent financing once the building is leased up. Apartment building financing compares the five main sources, how lenders size the loan, the documents to prepare and the steps from offer to closing.
Refinancing commercial property
A commercial refinance replaces your current mortgage with a new one, to lower the rate, change the term, replace a loan that is coming due or take cash out of built-up equity for the business. Lenders re-underwrite the property as if it were a new loan, so current income, occupancy and value all matter. Commercial real estate refinance loans explains the types of refinance, how to qualify and the process step by step.
Estimating the payment
Commercial loans often combine a shorter term with a longer amortization, which leaves a balloon balance when the term ends. Some include an interest-only period. A payment calculator turns price, rate and amortization into a monthly figure you can test against the property's income. Commercial real estate loan payment calculator explains the inputs, how amortization shapes the payment and how to model interest-only and balloon structures, with a calculator in the post.
Short-term bridge loans
A commercial bridging loan is short-term financing for when you need to close faster than a bank can, or when a property is not yet ready for permanent financing, such as a purchase at auction or a building being renovated or leased up. Bridge loans cost more and must have a clear exit: a sale or a refinance into a long-term loan. Commercial bridging loans covers when to use one, how to qualify and how to plan the exit.
Working with a commercial loan broker
A CRE broker matches your deal to lenders whose criteria it fits, prepares the package and helps negotiate terms. That can save time and widen your options, but you should understand how the broker is paid and what lenders it works with. Commercial real estate loan broker covers the process from application to closing, broker vs. direct lender, fees and red flags.
What CRE lenders look at
Expect lenders to review the property's rent roll and operating statements (to calculate net operating income and DSCR), an appraisal (to set the loan-to-value), your experience with similar properties, your liquidity and net worth, and for owner-occupied property, the operating business's financial statements and tax returns. Environmental reports may be required, especially for properties with fuel tanks or industrial use. A clean package with consistent numbers speeds every step.
Comparing options with FSE
FSE is an independent business funding brokerage that works with a panel of lending partners. If your business needs working capital alongside a property purchase or refinance, one application shows what you qualify for. To be considered, a business generally needs at least 1 year in business and $10,000 or more in monthly revenue.
Frequently asked questions
What DSCR do commercial lenders require?
Most want at least 1.20 to 1.25. SBA 7(a) loans use 1.15 for standard loans and 1.25 for most business purchases.
Is an apartment building commercial real estate?
Buildings with 5 or more units are financed as commercial real estate. Smaller buildings of 1 to 4 units usually use residential mortgages.
When does a bridge loan make sense?
When speed matters or the property cannot yet qualify for permanent financing, and you have a realistic plan to sell or refinance before the bridge loan comes due.
Can I use an SBA loan to buy my building?
Yes, if the business occupies it. An SBA 504 requires the business to occupy at least 51% of an existing building. SBA 7(a) and 504 loans cannot be used to buy an apartment building or other property held as a rental investment.
Need capital for the business behind the property? Apply now and compare offers from FSE's lending partners.
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