Introduction to Commercial Real Estate Financing
Commercial real estate (CRE) financing differs significantly from residential lending. Whether you’re acquiring a multifamily apartment building, mixed-use property, or retail center, understanding commercial financing fundamentals is essential for successful investing.
Types of Commercial Properties
Multifamily Properties (5+ Units)
Apartment buildings with five or more units are classified as commercial properties. These include:
Mixed-Use Properties
Properties combining residential and commercial uses:
Office Buildings
Properties designed for business operations:
Retail Properties
Commercial spaces for consumer-facing businesses:
Industrial Properties
Properties for manufacturing, distribution, or storage:
Key Commercial Financing Concepts
Loan-to-Value (LTV)
Commercial loans typically offer 65-80% LTV, meaning you’ll need 20-35% down payment. Higher LTV may be available for:
Debt Service Coverage Ratio (DSCR)
DSCR measures a property’s ability to cover debt payments:
DSCR = Net Operating Income ÷ Annual Debt Service
Most lenders require DSCR of 1.20-1.25 or higher, meaning the property generates 20-25% more income than needed for debt payments.
Cap Rate
Capitalization rate measures investment return:
Cap Rate = Net Operating Income ÷ Property Value
Higher cap rates indicate higher returns but potentially higher risk.
Commercial Loan Types
Conventional Commercial Loans
SBA Loans
Private Commercial Loans
Bridge Financing
The Commercial Loan Process
1. Pre-Qualification
Provide basic property and borrower information to assess viability and receive preliminary terms.
2. Application Submission
Complete formal application with:
3. Underwriting Review
Lender analyzes:
4. Property Valuation
Commercial appraisals include:
5. Closing
Finalize loan documents and fund the transaction.
Fast Private Lending’s Commercial Programs
We specialize in commercial financing for:
Program Highlights:
Getting Started
Commercial real estate investing offers significant wealth-building potential. Partner with a lender who understands commercial properties and can structure financing to meet your investment goals.
Contact Fast Private Lending today to discuss your commercial financing needs.