Overview
Commercial real estate financing can be appropriate when real property is involved — acquiring a property, refinancing an existing mortgage, pulling equity out via cash-out refinancing, or funding construction and expansion. Structures and terms vary based on property type, occupancy, and the borrower's financial profile.
- Acquisition, refinance, cash-out, and construction options
- Owner-occupied and investment property scenarios
- Terms depend on property type, value, and occupancy
- May allow access to property equity for business use
Acquisition
Commercial mortgage financing for purchasing a property — whether to house your own business operations or to hold as an investment. Loan size and terms depend on the property's value, the loan-to-value ratio, and the borrower's financial profile.
Refinance
Refinancing an existing commercial mortgage may allow a business to reduce its rate, extend the repayment term, or lower its periodic payment. Cash-out refinancing can also unlock property equity to fund business operations, improvements, or other capital needs — subject to loan-to-value limits and qualification.
Owner-Occupied vs Investment Property
Owner-occupied financing applies when the business owner's own company operates in the property; underwriting typically considers the operating business's revenue and financials. Investment property financing applies when the property is held to generate rental income; underwriting focuses on the property's net operating income, rent roll, and occupancy.
Construction, Renovation & Expansion
Construction financing can fund ground-up construction, renovation, expansion, and build-outs. Funds are typically disbursed in draws as milestones are completed, and the structure may convert to permanent financing once the project is finished. This can be appropriate for businesses expanding their footprint or upgrading a facility.
Commercial Mortgages
A commercial mortgage is a loan secured by commercial real estate, repaid over a defined term with a fixed or variable rate. The property serves as collateral, and terms depend on the property type, value, occupancy, and the borrower's credit and cash flow.
Qualification Factors
- Property type and appraised value
- Loan-to-value (LTV) ratio
- Debt service coverage ratio (DSCR)
- Borrower credit and financial profile
- Occupancy status (owner-occupied vs investment)
- For investment property: rent roll and net operating income
- Time in business and operating history
Frequently Asked Questions
Commercial real estate financing provides capital for acquiring, refinancing, constructing, or renovating commercial property. Structures include commercial mortgages, construction loans, and cash-out refinancing, with terms based on property type, occupancy, value, and the borrower's financial profile.
Owner-occupied financing applies when the business owner's own company operates in the property. Investment property financing applies when the property is held primarily to generate rental income. Lenders evaluate these differently — owner-occupied loans often consider the operating business's financials, while investment loans focus on the property's net operating income and rent roll.
Yes, for qualifying properties and borrowers. Refinancing may be used to lower the rate, extend the term, or access equity through cash-out refinancing. Eligibility depends on property value, current mortgage balance, cash flow, and the borrower's financial profile.
Construction financing can cover ground-up construction, renovation, expansion, and build-outs. Funds are typically disbursed in draws as construction milestones are completed, and the loan may convert to permanent financing once the project is finished.
Common factors include property type and value, loan-to-value ratio, debt service coverage ratio, the borrower's credit and financials, occupancy status, and for investment property, the property's rental income and rent roll.