7 Best Commercial Real Estate Loans and Rates of 2023 (Ranked)
Choosing the right commercial real estate loans is vitally important to your business. From SBA loans to equipment leases, the best commercial real estate loans can help you meet your goals. In this guide, I ranked and reviewed the 7 best commercial real estate loans, so that you can pick the best one for you.
Lendio
Lendio gives you access to more than 75 lenders that will compete for your business allowing you to choose the one that’s just right.
Bank of America
Bank of America provides you with a wide range of commercial finance options, including term loans and lines of credit.
Smartbiz
You can utilize a Smartbiz loan to purchase, refinance, and develop real estate with an SBA 7(a) real estate loan.
Wells Fargo
Wells Fargo works with you, as the business owner, to understand both the short and long-term knowledge and vision of your company.
PNC Bank
PNC Bank offers fixed or variable rates with terms ranging from 5 to 15 years and up to a 25-year amortization duration.
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Purchasing a property for commercial purposes is never an easy process. Starting from the loan research process, continuing with finding the right property management software, and then ensuring that you keep turning a profit over time, involves a lot of moving pieces.
When it comes to getting a real estate loan, this can be one of the most challenging steps in the whole process described above. To complicate things, there are so many different types of loans, requirements, and rates to consider.
One key point that helps with succeeding in this area is understanding the loan that is just right for you. Showing the lender that you’ve done your research and know what you’re talking about is an excellent way to get this process on the right track.
With various factors leading to a higher probability of the denial of a loan application, it pays you to know the options you have ahead of you.
In this post, I will review seven of the best commercial real estate loans that banks or financial companies can offer you. We will also go over the requirements to get approval for a business loan and what you should expect from your lender’s terms and conditions when paying back the loan.
Let’s get right into it.
What Are The Best Commercial Real Estate Loans And Rates?
The following is my list of the best commercial real estate loans and rates to consider right now.
1. Lendio.
Best overall to help find the exact commercial property loan you need.
Adam’s Take
Lendio is the best online loan marketplace for small business loans because they offer access to most lenders. This could mean more options and a potentially lower rate for your specific business needs.
Lendio gives you access to more than 75 lenders that will compete for your business – allowing you to choose the one that’s just right for your needs.
By filling in a single application, you will have the opportunity to find a lender that will provide you with a competitive rate and terms on a commercial loan.
In the recent past, Lendio has worked with firms’ business owners to secure $12 billion+ in funding from lenders all around the country. This means that you have a great experience when getting business owners the best deal available through their wide range of available business lenders.
Lendio is the most efficient platform for the commercial financing of a business entity, allowing you to grow your network of potential lenders exponentially and connect directly with them.
Key Features:
- Lendio’s cash flow insights give you the information you need to make informed decisions at all levels of your organization. Their free suite of tools includes loan monitoring, revenue growth, and bookkeeping management solutions.
- You may apply for a small company loan with them in 15 minutes – this means that you will be able to receive a fast quote on your loan application.
- Let Lendio do the maths for you, ensuring that you are getting the best loan option that suits your needs – no need to go to multiple sources to get the right information.
- Get access to your money within one business day once credit approval is granted by your lender.
2. Bank of America.
Best for requiring no collateral for a commercial loan.
Adam’s Take
Bank of America needs little introduction as one of the big banks in the United States. It offers a wide range of banking products and services, including commercial real estate loans.
Bank of America gives you the funds you need to grow your business. Moreover, getting fast business decisions is made easy by their efficient process. Bank of America provides you with a wide range of commercial finance options, including term loans and lines of credit.
With interest rates that are highly competitive when compared to other lenders, they are one of the best real estate banks.
Bank of America offers loan options for both new and existing small businesses, including no-collateral cash advances, basis loans, term loans, line of credit, and more.
Key Features:
- Purchase the land or buildings your business needs as it grows through their loan process, giving you the chance to expand as needed.
- Get peace of mind with flexible terms and competitive rates from Bank Of America.
- Invest in your company by using your equity so that you can gain interest from the loan money itself.
- With a line of credit that is secured with a blanket lien when it comes to assets or by providing a certificate of deposit, you may fund ongoing operational expenditures.
Key Information:
- Loan amount: Starting from $25,000
- Interest rate: Comes in as low as 3.00%
- Loan terms: 2 choices available:
- Maximum of 10 years with a balloon payment
- Maximum of 15 years with full amortization
- Qualifications needed: A period of at least 2 years in business under existing ownership; at least $250,000 in annual revenue
3. Smartbiz.
Best for getting SBA 7(a) loans.
Adam’s Take
I recommend Smartbiz for businesses that want to purchase or refinance owner-occupied real estate with long-term, fixed-rate financing. As a result of an SBA 7(a) real estate loan from Smartbiz, your options for various types of properties drastically open up.
You can utilize a Smartbiz loan to purchase, refinance, and develop real estate with an SBA 7(a) real estate loan.
SBA 7(a) loans from banks in the SmartBiz network are a fantastic alternative for small firms. These loans have amortizing 25-year terms and fluctuating interest rates ranging from 4.75% to 6.00%.
With such a loan, a small business can finance real estate and equipment, as well as renovate or expand its facilities, as needed.
If you want to refinance a real estate loan, acquire an office building, or other owner-occupied commercial property, SmartBiz is definitely a bank to consider.
Key Features:
- In as little as 5 minutes, you can submit your application to pre-qualifying for a loan. This does not affect your credit score.
- Your SmartBiz Loans Relationship Manager is available at all times to help you through the process so that you can be sure you are receiving the best rates possible.
- SmartBiz Loans provides loan options for existing and new businesses, which includes SBA loans as well as other general commercial financing types of loan programs.
- Funds may be transferred into your account and closed in as little as 30 days after the credit is granted.
4. Wells Fargo.
Best for guiding you through the loan process from start to finish.
Adam’s Take
I advise you to check out Wells Fargo if you’re looking for a personalized and consultative approach when working with a bank. Wells Fargo is also a good option when looking for guidance in the loan process along with an understanding of the solutions that work best for your specific real estate financing needs.
Wells Fargo works with you, as the business owner, to understand both the short and long-term knowledge and vision of your company. This knowledge helps the bank create a customized financing program that will meet your business’ financing needs.
Wells Fargo provides loan options for both new and existing small businesses, including SBA loans as well as other general commercial financing programs.
Through their years of experience, this bank has the expertise to assist you in moving your company forward now and in the future. Small firms may benefit from their numerous easy-to-use goods, tools, and resources to help you simplify your financial existence.
Key Features:
- Use revolving credit for your continuing business operations to your advantage so you can improve existing cash flow and maintain a business advantage.
- Have a finance officer assigned to you, who will help you turn your financing needs into a feasible plan of action using the right business plan software. This includes a funding strategy, options for repayment, and possible exit strategies.
- You can save money by refinancing at a cheaper rate or for a longer period, ideal for businesses that have experienced growth.
- As you’re expanding, obtain funding for your firm’s growth or the acquisition of new commercial property.
5. PNC Bank.
Best for finding the most convenient loan terms.
Adam’s Take
PNC is excellent for those looking for different options regarding the rate and term of their loan. You can also choose a fixed or variable rate, which can offer various degrees of flexibility based on your needs.
PNC Bank offers fixed or variable rates with terms ranging from 5 to 15 years and up to a 25-year amortization duration. Having this range of time given to you means that finding a loan that suits your needs and borrowing power becomes that much more possible.
With a wider range of mortgage amounts and maturity dates than its closest competitors, PNC Bank has a product for just about any business.
Whether you are trying to refinance or need a new loan, PNC Bank’s real estate finance professionals can help you determine the best loan for your situation.
Going through the application process on their website is a breeze, and can be done quickly, securely and from the comfort of your home.
Key Features:
- Up to $3 million is available for loan lending purposes which means that you can expand your business as you require.
- You can get a loan with flexible terms, so you have plenty of options to choose from.
- The company offers up to 25 years in repayment terms so you will be able to repay back the loan without serious time pressure.
- With payments automatically deducted from your checking account, you can have peace of mind knowing your business will always be funded.
Key Information:
- Loan terms: Typically goes up to fifteen years, also giving the option of amortization of up to 25 years
- Interest Rates: You can choose between variable or fixed rates based on the prime rate
- Collateral required: You can provide equity in real estate that is owner-occupied
- Loan amount: this amount ranges from $100,001–$3 million
6. JP Morgan Chase.
Best for clarity and certainty in multi-family commercial loan projects.
JP Morgan Chase is known for the confidence they provide their customers at all the stages of obtaining a real estate loan.
Large commercial loans for renovation projects or expansions are not a problem with JP Morgan Chase; one quality that makes this bank stand out from its competition.
As a bank, they’re a go-to source for investors and owners of stabilized office, retail, industrial, and mixed-use properties in areas such as financing alternatives, local knowledge, and assurance of execution.
The above, coupled with their experience in the industry, makes them a reliable option for borrowers of all sizes.
Operators, real estate firms, and investors, as well as trusts, all benefit from their sector knowledge, personalized attention, and comprehensive financing and treasury services.
Key Features:
- Help manage operating costs and improve cash flow by getting solid advice from their financial professionals.
- Have the flexibility to use your real estate loan as a way to generate income, either through a refinance program or even a further loan for ongoing renovation and improvement projects.
- Take advantage of their partners’ full resources, which means that you will work with experienced, knowledgeable professionals who understand the commercial real estate industry.
- Have access to monitor and control your liquidity to always have the right knowledge when it comes to your cash flow. This is essential for making the right business decisions.
7. Northeast Bank.
Best for simplifying the commercial real estate loan process.
Northeast Bank offers flexible and fast approvals, so you can find the best loans to suit your business needs; all without any unnecessary waste of time.
This bank focuses on these two aspects since traditionally, the process of applying for and getting a loan approved, used to be a time-consuming and complex process.
As a result, most people tend to go to larger banks that have more resources to get their cash fast. Although this is not a bad thing, it does sometimes bring with it more red tape.
Due to all of this, Northeast Bank has simplified the entire process by streamlining it and making sure you get your money as quickly as possible.
Ensuring the security of your funds is also a top priority for them, so you can always be certain that you’re receiving a fair and easy-to-understand rate.
With some of these competitive rates even including no extra bank fees, Northeast Bank is a good option when you need to make the most out of your money – and do it fast.
Key Features:
- With solutions that are available nationwide, you can be sure that you will get your money in a time-efficient way when you work with Northeast Bank.
- They consider both performing and underperforming commercial property loans to help you get the most out of your money.
- They raise money for real estate lenders, loan investors, and commercial and residential mortgage brokers by offering quick loans, lines of credit that might include fee-free loans, and equity lines of credit.
What are Commercial Real Estate Loans and Rates?
Commercial real estate loans (sometimes referred to as construction loans) are used to fund up to 100% of the purchase price or construction costs for commercial property.
They can also be used for renovation projects, debt refinancing, and working capital for businesses. The purpose of a commercial loan is to borrow money at a fixed, variable, or adjustable-rate to purchase, construct or refinance commercial property.
Typically they’re repaid in monthly installments over a set period – usually between five and ten years – but you can request longer terms if you need it.
Commercial real estate loans usually involve a large sum of money (much more than a personal real estate loan would involve). As a result, the lender will want to be sure that you can repay them, so they’ll look closely at your credit history and financials.
They’ll also consider things like the location, size, and condition of the property, what type of business you operate (and how successful it is), and any other debts or commitments that might affect your ability to pay back the loan on time.
Average Commercial Real Estate Loan Rates
The average commercial real estate loan rate is between 2.2% to 18%. This rate depends on various factors, such as the type of loan (more on this later), loan-to-value (LTV), and the size of the loan.
Let’s define these two important factors.
Loan-To-Value (LTV) is used to calculate how much money you’re borrowing in comparison to the value of the property. Lenders look at this factor to ensure eligibility and prefer lower LTVs because it means less risk for them.
However, depending on business credit scores and other factors, there might be a lender that will fund a higher LTV. This just means you’ll have a larger monthly payment once the interest rate is applied.
The size of the loan will also have an impact on the total interest rate. As a general rule, larger loans are more expensive than smaller ones because you’re borrowing more money.
When it comes to commercial real estate loans, lenders will have set criteria that they use for underwriting. This is a way of checking the details in your loan request and making sure you qualify for the funds.
Types Of Commercial Real Estate Loans Repayment Methods
There are three types of commercial real estate loans repayment methods – fixed rate, variable, and adjustable. Let’s have a look at what each of these involves.
Fixed rate commercial real estate loans
Fixed-rate commercial real estate loans are the most straightforward type of loan you can get. You’ll know that your payments (interest and principal) will be the same for the length of the loan, which makes it easier to plan for expenses like taxes and other costs associated with owning a business or property.
You might be able to make interest-only payments, although this isn’t common unless you can afford larger payments. Your payments should generally cover both interest and principal; otherwise, if you stop paying interest, you could lose your property to foreclosure.
Fixed-rate commercial real estate loans are best for borrowers who can make higher monthly payments and don’t want surprises when it comes to their future payment amount.
Variable commercial real estate loans
Variable rate loans for commercial real estate loans are similar to fixed-rate loans in that you’ll know exactly how much your monthly payment will be over the term
However, where they differ is that your interest rate can change over time based on an index. That means the lender will look at a variety of factors they deem relevant and make sure your rate matches what you agreed to when you signed the loan documents.
Variable commercial real estate loans are best for borrowers who can’t afford high monthly payments because their interest rates might be less than those paying at a fixed interest rate. However, there is always a small risk that the monthly interest might increase. This increase would be based on factors that are outside the control of the business owner.
Adjustable rates
Here, the monthly payments can also change depending on the interest rate. The interest rate on an adjustable-rate commercial real estate loan is tied to a specific index and, like variable rates, your payment amount (and therefore the total amount you’ll pay) can change over time.
There are some types of adjustable-rate loans that might be one-time-only adjustments or can increase or decrease every year. The length of time before the lender can adjust your interest rate again depends on how much money you get and when you sign up for it.
It could be six months after closing, a year after that, or even five years after you get the loan. As with variable rate commercial real estate loans, adjustable-rate loans are best for borrowers who don’t want to go for a higher interest rate but at the same time, they might be subjected to a higher increase on their loan repayments over time.
Property types that can be financed
Let’s take a look at the different types of properties you might want to finance using a commercial real estate loan.
Office buildings
These are generally ideal for companies looking to expand their business operations as the business scales. The more people that are employed, the more space is needed.
Industrial buildings
Industrial buildings are great if you’re in the manufacturing or distribution industry and need more space or want to keep your costs down by owning instead of renting.
Retail/mixed-use property
This might be perfect if you have a retail or commercial space that’s been operating at a loss and you need to find a way to turn things around.
Multifamily/apartment complex
A multifamily building has the potential for great returns if the right renters can be found. These buildings are also ideal for those looking for wealth management through building equity over several years.
Farmland/agricultural property
Leasing farmland can be a great investment for agricultural companies looking to expand their operations.
Shopping malls/retail centers
If you’re not interested in owning your building but still want the opportunity to rent out retail and commercial spaces, a shopping mall might just be what you need.
What are the types of loans available?
There are various types of loans that you might want to consider. Real estate loans commercial lending companies offer the following types.
Traditional commercial mortgage
A traditional commercial mortgage is an ongoing loan that allows you to borrow a set amount of money. You can then do with it as you please, whether that’s buying up real estate or using the money in investment property.
You’ll make monthly payments to cover both your interest and principal until your loan expires. At this point, you might have the option to repay in full or take out another loan if you want.
Conduit/CMBS loans
Conduit loans are most commonly used to buy up real estate and, as such, they include a specific type of repayment loan term. They are typically brought together with other commercial mortgages and can then be sold on secondary markets.
The major disadvantage of a CMBS loan is that it’s difficult to get out of it early if you need to. It can be way too expensive to do so – especially in the case of the lender requiring the borrower to replace their loan with items such as bonds.
CMBS loans typically come with a fixed interest rate set over the agreed-upon loan period.
SBA 7(a) loan
An SBA 7(a) is a special type of commercial lending that is designed for small businesses. These types of loans are typically issued by private companies and backed up (in part) by the Small Business Administration. You might qualify to get one if you’ve been in business for more than two years and have a strong annual revenue when you apply for the loan.
SBA 504 loan
The SBA 504 loan is based on the property you want to buy or improve. This type of commercial lending focuses more heavily on how much you’re putting in upfront and making sure your value won’t change dramatically over time.
It also provides fixed, long-term financing of up to $5 million and is typically used in relation to business growth and job creation.
Commercial bridge loans
A commercial bridge loan isn’t a permanent loan – in the sense that it’s not a way to long-term finance; it’s also designed for those who want temporary help. You might use one of these loans to buy up real estate and then either flip it or wait until you can get a more traditional loan before taking over the property.
Permanent loans will help you over the long period and thus, a bridge loan isn’t the right fit if this is what you’re looking for.
Other Factors To Consider When Taking Out A Commercial Real Estate Loan
With many steps involved in the process of getting a business loan, there are various factors to keep in mind.
Let’s now speak about some of these factors and why they are important in the process.
The down payment
You’ll need to put down a good chunk of money as part of your real estate loan. The percentage you have to pay will vary depending on the type, which is why you must speak with a commercial lender before you figure out how much money you need to put away for this.
The FDIC
This is another important item to consider if you’re already considering a commercial real estate loan. The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance for all types of institutions that are involved in consumer banking.
Understanding what this institution does could be helpful as you consider other loans from different commercial lenders.
Debt-service coverage ratio (DSCR)
All real estate loans have a debt service coverage ratio and it’s designed to determine how much money you’ll have leftover each month after paying the mortgage. Your commercial lender will use this number along with your overall debt-to-income ratio when deciding if they want to do business with you.
Personal guarantee
Of course, you might have to sign a personal guarantee as the property owner. Your name will be on the contract and you’ll be responsible for paying back the loan.
This might also affect your creditworthiness so it’s definitely something to keep in mind. As with getting a startup business credit card with no credit, there are ways to go around such an issue, but it’s always best to know what you’re getting into.
Prepayment penalties
A real estate loan might come with certain prepayment penalties. This means you can’t just pay off the loan early if that’s what you want. This becomes an important consideration since paying off your loans before they’re due is a good idea financially but might not be possible due to these penalties.
Origination fees
This is a fee that some lenders typically charge to cover the administrative costs of setting up your loan. Your lender might also have you pay for title insurance, tax service coverage, and other factors which might lead to more origination fees.
Commercial Real Estate Loans – FAQ
What is a loan to value ratio?
A loan to value (LTV) is a term that lenders use when they look at your ability to borrow money and what you’re borrowing it for. The LTV ratio takes the total amount of real estate you own (along with other assets such as cars, businesses, etc.) and divides it by what you want to borrow.
If you buy a $500,000 commercial property and you want to borrow $300,000 against it, your LTV is 60%.
What does the small business administration SBA do?
This organization is there to help the interests of small businesses in their running. As an organization, it aids, gives advice and protection to businesses, and addresses any concerns they have as they operate.
This administration also helps to ensure that free competitive enterprises are given all the help they need to maintain their strength through difficult times.
What is the best type of commercial mortgage loan to consider?
To start, you should know that there are many types of commercial mortgages to choose from.
Understanding that will help you dive deeper into researching what specific needs your business has, which allows you to choose the right type of loan to go for.
What are hard money loans?
Hard money loans are a type of commercial lending that uses the value of your property to help you pay back what you owe.
Because they’re based on value, this type of loan comes with relatively high-interest rates and often short-term financing. It works well if your business is struggling and needs fast cash without a lot of red tape, but you should explore all other commercial lending options before trying this one.
Hard money loans when buying commercial real estate are usually considered as a last resort.
Wrap Up.
Commercial real estate loans are a major factor to consider when setting up your business.
If you’re not sure where to get started, think about the type of commercial real estate financing that will work best for your establishment and compare commercial lenders who specialize in what you need.
Remember that there are many types of commercial real estate loans to consider including SBA-backed loans, bridge loans, and commercial mortgage loans.
As you compare commercial lenders, you’ll get a clearer picture of what kind of rate and repayment terms will work best for your business.
To recap, here are the best commercial real estate loans and rates to consider:
- Lendio: Best overall to help find the exact commercial property loan you need.
- Bank of America: Best for needing no collateral for a commercial loan.
- Smartbiz: Best for getting SBA 7(a) loans.
- Wells Fargo: Best for guiding you through the loan process from start to finish.
- PNC Bank: Best for finding the most convenient loan terms.
- JP Morgan Chase: Best for clarity and certainty in multi-family commercial loan projects.
- Northeast Bank: Best for simplifying the commercial real estate loan process.
With the above list in mind when looking for the best, long-term solution for your financing needs, you’ll be able to find the right loan solution for your business.
What are your thoughts? Have you ever gone for a real estate commercial loan? Let us know in the comments below.
Further reading on AdamEnfroy.com: Did you know that real estate agents are using virtual tour software to show prospects a 360-degree tour of commercial property for rent?
On the other hand, if you’re interested in both short and long-term investments, check out my post on the best investment apps right now. You can also read about the best places to buy and sell online businesses if a digital business is something you’re interested in.
Finally, if you’re interested in learning not just about physical real estate, but also virtual one, check out my post on digital real estate. This will help you understand this new phenomenon that is taking over the industry as we know it.
