Commercial real estate is a powerful investment vehicle — whether you’re buying office space, retail buildings, industrial units, or mixed-use properties. But before you sign the dotted line, there’s one hurdle every investor must cross: securing financing.
This guide walks you through the essential loan requirements for commercial property in 2025. We’ll break down credit scores, down payments, income documents, and lender expectations, so you can approach the process confidently and prepared.
What Are Commercial Property Loans?
A commercial property loan is a type of mortgage specifically used to purchase, develop, or refinance properties that will be used for business purposes. These include office buildings, warehouses, apartment complexes (usually five units or more), and retail centers.
Unlike residential loans, commercial loans tend to have stricter qualifications, shorter terms, and higher interest rates — making it crucial to understand all the necessary requirements upfront.
Types of Commercial Property Loans
Before diving into the loan requirements, it helps to know what types of loans are available for commercial real estate:
Traditional Commercial Mortgages
Offered by banks and credit unions, these loans are secured by the commercial property and often come with 5-20 year terms.
SBA 7(a) Loans
Backed by the U.S. Small Business Administration, these loans are ideal for small business owners looking to purchase or improve real estate.
SBA 504 Loans
Designed for major fixed asset purchases, including real estate and equipment. They offer fixed rates and long repayment terms.
Commercial Bridge Loans
Short-term loans (usually 6 months to 3 years) that help investors close quickly while waiting on long-term financing or flipping properties.
Hard Money Loans
Private lenders offer these asset-based loans, typically with fast approval and higher interest rates.
Basic Loan Requirements for Commercial Property
Let’s break down the most common requirements lenders look at when evaluating your application.
Good to Excellent Credit Score (Typically 660+)
Most lenders require a minimum credit score of 660 for traditional commercial loans. However:
- SBA loans might accept scores as low as 640.
- Private lenders may be more flexible but charge higher interest rates.
A higher credit score means:
- Lower interest rates
- Better terms
- Greater approval chances
If your credit score is low, consider improving it before applying or partnering with someone who has stronger credit.
Substantial Down Payment (20%–30%)
Unlike residential loans that allow low or no down payments, commercial real estate loans typically require 20% to 30% down. Some loans — especially from banks — may even demand up to 35% down, depending on the property type and your credit risk.
Lenders want borrowers to have “skin in the game” to reduce risk.
Debt-Service Coverage Ratio (DSCR) of 1.25 or Higher
DSCR is a key indicator lenders use to determine whether your property will generate enough income to cover loan payments.
Formula:
DSCR = Net Operating Income ÷ Annual Debt Obligations
Example:
If a property brings in $125,000 annually and the mortgage costs $100,000, your DSCR is 1.25.
Most lenders require a minimum DSCR of 1.25, meaning your net income must be at least 125% of your yearly loan payment.
Strong Business Financials or Personal Income Verification
Lenders will typically request:
- Business tax returns (last 2-3 years)
- Personal tax returns (especially for sole proprietors)
- Profit and loss (P&L) statements
- Bank statements
- Balance sheets
If your business is new or not profitable, you may need to:
- Provide a personal guarantee
- Show additional sources of income
- Use collateral
Collateral — Usually the Property Itself
Most commercial real estate loans are secured, meaning the property acts as collateral. If you default, the lender can foreclose.
Some lenders may require additional collateral if:
- You have a low credit score
- You’re borrowing a large sum
- The property’s value is uncertain
Appraisal and Environmental Reports
Before finalizing a loan, the lender will order:
- Property appraisal to determine market value
- Environmental site assessment (ESA) to check for contamination or hazardous materials
You’ll typically cover these costs, which can range from $2,000 to $5,000+.
Business Plan or Investment Strategy
For SBA or investment-related loans, lenders may ask for a:
- Detailed business plan
- Revenue forecast
- Breakdown of how the property will be used
Investors flipping or renting property may need to show:
- Renovation budget
- Rental income projections
- Market analysis
Loan Documentation Checklist
Here’s what you should prepare before applying for a commercial property loan:
| Document | Purpose |
|---|---|
| Personal ID & SSN | Identity verification |
| Credit Report | Assess financial history |
| Tax Returns (2–3 years) | Verify income |
| Business License & EIN | Confirm legitimacy |
| Lease Agreements (if applicable) | Show rental income |
| Purchase Agreement | Proof of intent |
| Business Plan (optional) | Project growth and usage |
| Appraisal Report | Assess market value |
| Environmental Report | Check for liabilities |
Prequalification vs. Preapproval
- Prequalification: A quick overview based on self-reported info. Useful for comparing lenders.
- Preapproval: A formal review with credit check and financial document submission. Strengthens your purchase offers.
If you’re serious about buying, go for preapproval.
Tips to Improve Your Loan Approval Odds
- Boost Your Credit Score
- Pay off existing debts
- Limit new credit inquiries
- Review your report for errors
- Increase Your Down Payment
- A larger down payment reduces lender risk and may lead to lower rates.
- Prepare Accurate Financials
- Keep your books clean and up-to-date. Consider hiring a CPA.
- Choose the Right Lender
- Not all lenders specialize in commercial property. Compare options like:
- Traditional banks
- SBA lenders
- Online lenders
- Private lenders
- Not all lenders specialize in commercial property. Compare options like:
- Start with a Smaller Property
- If you’re new to commercial real estate, start small to build a solid repayment history.
How Are Commercial Loan Terms Structured?
| Feature | Typical Terms |
|---|---|
| Loan Amount | $250,000 – $5M+ |
| Term Length | 5 to 25 years |
| Interest Rates | 5% – 10%+ (varies by lender) |
| Amortization | Often longer than loan term |
| Balloon Payments | May be required after 5–10 years |
| Fixed or Variable | Both available |
Note: SBA 504 loans can offer terms up to 25 years with fixed interest — making them attractive for long-term investments.
Best Lenders for Commercial Property Loans in 2025
Here are a few lenders known for offering competitive terms:
- Wells Fargo Commercial Real Estate
- Chase Bank Business Lending
- Bank of America
- Live Oak Bank (SBA)
- Lendio (online marketplace)
- Fundera
- Crestmont Capital (Hard money & bridge)
Always compare multiple offers to get the best rates.
FAQs: Commercial Property Loan Requirements
Can I get a commercial loan with bad credit?
Yes, but expect higher rates and stricter terms. Private and hard money lenders are your best bet.
What is the minimum down payment for a commercial loan?
Most lenders require 20%–30%. SBA 504 loans may allow as low as 10% down for qualified borrowers.
Is a personal guarantee always required?
Not always, but many lenders request it for small businesses or newer investors.
Final Thoughts
Getting approved for a commercial property loan is far more complex than financing a residential home. But with the right preparation — strong credit, a solid business plan, and full documentation — you can land competitive financing and invest in income-producing real estate with confidence.
Make sure to understand the loan requirements for commercial property well in advance, and consult a commercial lending specialist to walk you through the process step-by-step.
Need Help Starting Your Loan Journey?
Speak with a commercial mortgage broker or financial advisor to explore which loan option is best for your specific property type and financial situation