Commercial real estate loans sit at the center of how investors, developers and operating businesses acquire, build and refinance income-producing property. In a tighter credit environment, with interest rates higher and regulators pressing banks to be more cautious, getting the right structure and lender is no longer optional. It directly affects whether a transaction closes and how much cash flow remains after debt service.
When a deal is structured well, commercial real estate financing can unlock acquisitions, fund development pipelines, support repositioning plans and stabilise portfolios. When it is structured poorly, high leverage, weak covenants or unrealistic assumptions can trap borrowers and erode equity value.
This guide explains what commercial real estate loans are, the main types of facilities available, how lenders think about DSCR, LTV and risk, and what borrowers should prepare to qualify. It also outlines how alternative lenders and private debt funds are filling gaps left by banks, and how Financely Group helps clients secure capital for acquisitions, refinancing and development.
A commercial real estate loan is a facility secured against income-producing or development property that is used for business or investment purposes rather than owner-occupied residential use. It funds acquisitions, construction, redevelopment or refinancing of assets that are expected to generate rental or operating income.
Typical property types that attract commercial real estate finance include:
These loans allow borrowers to acquire new property, refinance existing debt at maturity, fund construction or heavy refurbishment and release equity from stabilised portfolios. Providers range from commercial banks and building societies to private credit funds, debt funds, specialist bridge and construction lenders and alternative finance platforms that arrange capital from multiple sources.
There is no single “commercial real estate loan”. The capital stack for a project or asset is usually built from several layers of senior, subordinated and equity capital. Understanding where each product sits in the stack helps sponsors choose the right mix for their project.
Commercial mortgages are standard senior loans secured against income-producing property. They are commonly used for stabilised or near-stabilised assets with predictable rental income and moderate leverage. Tenors are often medium to long term, with amortisation or interest-only periods depending on the lender and business plan.
Bridge loans provide short-term capital for acquisitions, refinancings or repositioning plans where the property does not yet meet long-term lending criteria. They are designed to cover a period of transition, such as lease-up, light refurbishment, change of use, release from a distressed situation or a sale process.
Construction loans fund ground-up development or major redevelopment of commercial or multifamily property. Drawdowns are staged against certified progress, and lenders focus heavily on cost budgets, contingencies, contracts, planning consents and the capability of the project team.
Mezzanine financing is subordinated capital that sits between senior debt and equity. It is used to fill gaps when senior lenders will only fund up to a conservative LTV, but sponsors wish to limit equity outlay. Mezzanine often carries higher interest, fees and sometimes profit participation or warrants in exchange for its junior position.
Commercial mortgage-backed securities (CMBS) loans are originated and then securitised into bond structures that are sold to capital markets investors. For borrowers, CMBS facilities can offer longer-term, non-recourse structures with defined covenants and servicing arrangements. They require strong, stable assets and detailed documentation.
Hard money loans focus primarily on collateral value and exit potential rather than sponsor financial strength. They are typically used when timing is critical, the situation is complex or traditional lenders are unwilling to engage. Pricing is higher, and tenors are short, but execution can be rapid if the asset and exit are defensible.
Some projects are better served by bringing in a capital partner rather than stretching leverage. Equity and joint venture capital involve a co-investor sharing risk and return, often in exchange for preferred returns, promote structures and governance rights. This is relevant for large developments, repositioning strategies and programmatic partnerships.
| CRE Financing Type | Typical Use Cases | Key Structural Points |
|---|---|---|
| Commercial Mortgages | Stabilised office, industrial, retail, multifamily and hotel assets with predictable income. | Senior secured, moderate LTV, DSCR-driven covenants, longer tenors, often amortising or partly interest-only. |
| Bridge Loans | Acquisitions, lease-up, light refurbishment, time-sensitive refinancings and recapitalisations. | Short tenors, higher pricing, business-plan-driven take-out, strong focus on exit strategy and sponsor capability. |
| Construction Loans | Ground-up development and heavy value-add projects across all CRE asset classes. | Staged drawdowns, interest on drawn amounts, covenants linked to cost-to-complete, pre-sales or pre-leasing in some cases. |
| Mezzanine Financing | Filling equity gaps on acquisitions, developments and recapitalisations where senior LTV limits are conservative. | Subordinated to senior debt, higher coupon, fees and potentially profit share, intercreditor agreements with senior lender. |
| CMBS Loans | Large, stabilised portfolios or single assets with strong tenants and leases in core markets. | Non-recourse to sponsors, standardised covenants, servicing by third parties, long-dated fixed or floating coupons. |
| Hard Money Loans | Distressed situations, urgent acquisitions, complex ownership or title issues, transitional assets. | High pricing, short term, strict collateral focus, quick decision cycles, clear pay-off or refinance plan required. |
| Equity and Joint Venture Capital | Large developments, platforms and repositionings where leverage alone is not appropriate. | Shared ownership, preferred returns and promote structures, governance and control negotiated deal by deal. |
Lenders do not look only at the property value on paper. They analyse a combination of asset quality, location, tenant profile, rental income, market fundamentals, sponsor strength and exit strategy. The loan terms that follow are the result of that risk assessment, not an arbitrary formula.
While each lender has its own models, several factors appear in almost every commercial real estate credit decision.
Regardless of loan type, borrowers who prepare clear plans and documentation are more likely to receive realistic offers. The following requirements form the backbone of most CRE credit files.
Lenders expect a written plan that explains the asset, market, business strategy and timeline. For income-producing assets, this means a leasing and asset management plan. For development or heavy refurbishment, it means a clear schedule, cost budget, contractor strategy and marketing approach.
Independent valuation remains central to CRE lending. Lenders typically require appraisals from approved firms, with clear assumptions on cap rates, rents, vacancy and comparable evidence. For development, valuation may focus on both current land value and completed value.
For stabilised properties, net operating income after realistic allowances for vacancy, operating costs and maintenance must comfortably cover interest and, where relevant, principal. For assets in transition, lenders rely on pro forma cash flows but will test them against conservative occupancy and rent levels.
Sponsors should be prepared to provide evidence of previous projects, references, corporate structure charts and personal or corporate financial statements. Net worth, liquidity, contingent liabilities and guarantees are all part of the risk analysis.
Commercial real estate lending is secured lending. Lenders look at title, zoning, environmental reports, existing encumbrances, easements and any legal issues affecting the property. Clean collateral with clear first-ranking security supports better terms and higher leverage.
A typical information pack for a commercial real estate loan will include:
Interest rates and fees for commercial real estate loans vary by loan type, asset quality, sponsor profile and lender. Base rates and credit spreads move over time, but the relative pricing between products tends to follow a similar pattern.
Senior mortgages on core assets sit at the lower end of the pricing spectrum. Bridge, construction, mezzanine and hard money loans sit higher to reflect shorter duration, higher risk and bespoke structuring. Pricing can be fixed or floating, with prepayment penalties or make-whole provisions on some facilities.
The ranges below are indicative and for education only. Actual pricing depends on jurisdiction, lender, asset, sponsor and market conditions at the time of closing.
| CRE Product | Relative Pricing Level | Notes on Rate Drivers |
|---|---|---|
| Commercial Mortgages | Lowest to moderate | Priced off base rates plus a modest spread for strong, stabilised assets with healthy DSCR and low to mid LTV. |
| Bridge Loans | Moderate to high | Higher spreads reflect shorter duration, business-plan risk and less stabilised income; pricing improves with strong sponsors and clear exits. |
| Construction Financing | Moderate to high | Risk sits in cost overrun, delays and leasing or sale risk; pricing reflects contractor strength, pre-sales, pre-leasing and contingency buffers. |
| Hard Money Loans | High | Highest pricing due to urgency, complexity or distress; focus on collateral value and exit, not long-term relationship pricing. |
| Mezzanine Financing | High | Subordinated position and equity-like risk produce higher coupons and fees; sometimes includes profit participation. |
Qualifying for a commercial real estate loan is less about ticking boxes and more about presenting a coherent, well-documented story that fits a lender’s mandate. The steps below improve the chances of a positive outcome.
Start with a precise statement of what you need the capital for, how long you need it and how it will be repaid. Lenders respond better to a clear acquisition, refinancing, development, repositioning or recapitalisation thesis than to vague requests for “general funding”.
Gathering financials, rent rolls, budgets, valuations and corporate documents upfront speeds up credit work and signals professionalism. Disclosing issues early builds trust and allows time to solve them rather than letting them appear late in the process.
Where possible, reduce unnecessary debt at the sponsor level, show evidence of liquidity, and finalise equity commitments before approaching lenders for high leverage. A strong sponsor balance sheet and clear equity contribution improve negotiating leverage on pricing and covenants.
For bridge, construction and special situation loans, the exit strategy is as important as the asset itself. Lenders want to see realistic refinancing, sale or stabilisation plans, supported by data on comparable transactions, leasing demand and capital market conditions.
Not every lender funds every asset, jurisdiction or structure. Financely Group helps sponsors match their transaction to lenders whose mandates, risk appetite and ticket sizes fit the need. This reduces time spent on mismatched conversations and increases the probability of securing terms that can actually close.
Commercial real estate finance touches almost every part of the built environment. Typical use cases include:
Borrowers today face a tougher environment than in many previous cycles. The capital is still there, but lenders are more selective and more sensitive to risk.
Financely Group works with property investors, developers and operating companies that need capital for acquisitions, refinancing and development but do not fit a simple bank template. Our role is to help clients position their projects for credit approval and match them with lenders whose mandates actually fit the deal.
Through regulated partners, we access private credit funds, debt funds, bridge and construction lenders and larger real estate investors across key markets. We focus on structured transactions where clear information, disciplined underwriting and realistic business plans can attract long-term capital.
On each mandate, we help sponsors assemble bank-grade information packs, frame DSCR and LTV in a way that lenders can test, and set out credible exit and refinancing routes. The goal is not only to receive term sheets, but to secure terms that can survive diligence and reach closing.
If you are planning a commercial property acquisition, refinancing or development, the right time to organise financing is before you sign binding commitments. Early engagement with lenders reduces execution risk and gives you room to adjust leverage, structure and timelines.
Financely Group can review your plans, indicate which types of lenders are most realistic and outline what information they will require. With that map in place, you move faster from intent to funded transaction.
Share your property details, financials and development or investment plan with our team to explore commercial real estate loan options and lender appetite.
Submit Your CRE Funding RequestDisclaimer: This page is for general information only and does not constitute legal, tax, accounting or investment advice. Financely Group acts as advisor and arranger through regulated partners and is not a bank or direct lender. Any commercial real estate loan, security or capital raising structure is subject to underwriting, KYC, AML, sanctions screening, legal review, documentation, perfected security and approvals by relevant stakeholders. No public offer or solicitation is made on this page.
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