Simple Guide to Commercial Real Estate Loans

Commercial Real Estate Loans: Your 2025 Guide to Smart Investment Financing

Thinking about buying a rental building, retail store, or office space? You might need a commercial real estate loan to make it happen. Commercial real estate loans are built for business and investment properties, unlike home loans. In this guide, we’ll explain what they are, the types of loans you can get, and how to qualify for one with Gustan Cho Associates.

What Are Commercial Real Estate Loans?

Commercial real estate loans are essentially mortgages used for purchasing or refinancing various property types such as apartment complexes, office buildings, retail stores, warehouses, or mixed-use developments. These loans are meant for places that make money or are intended for business use. Unlike regular home loans, commercial real estate loans often focus more on how much income the property generates and its overall value rather than just your personal income or credit score. Sometimes, you might not even have to personally back the loan.

Recourse vs. Non-Recourse Loans

When looking into commercial real estate loans, it’s a good idea to know the difference between recourse and non-recourse loans. In the case of recourse loans, if you fail to repay the loan, the lender has the right to pursue your personal assets, such as your savings or possessions. This adds a layer of risk for borrowers.

On the flip side, non-recourse loans are much friendlier for your personal finances. If things don’t go well and you can’t make payments, the lender can only take the property itself, leaving your other assets, like your savings or home, out of it. This makes non-recourse loans a safer bet for diving into commercial real estate. At Gustan Cho Associates, we offer both types of loans depending on your needs and the specifics of your deal.

What Types of Properties Need Commercial Real Estate Loans?

Here are the most common property types financed with commercial loans:

• Multifamily buildings with 5+ units
• Mixed-use buildings with both living and business space
• Retail strip malls and standalone stores
• Office buildings and business centers
• Industrial warehouses and distribution centers

If the building has 1 to 4 residential units and you live in one of them, you may still qualify for a residential loan. Otherwise, commercial real estate loans are the go-to option.

Common Types of Commercial Real Estate Loans

Let’s look at the most common kinds of loans for commercial real estate.

1. Traditional Commercial Mortgages

Traditional commercial mortgages are commonly used to borrow money to buy a business property. These are loans from banks or other lenders that help you pay for things like office buildings, stores, or warehouses. You usually need to show that you have a good credit history to get these loans, which means you pay back your debts on time.

You need to make a large down payment, usually between 25% and 30% of the property’s price. This is the money you pay upfront before getting the loan. Plus, lenders want proof that the property can make money, like showing them the business plan or rent agreements. These steps help them feel confident that you can repay commercial real estate loans.

2. SBA Loans

Backed by the U.S. Small Business Administration, these loans are perfect for business owners who plan to use at least 51% of the property. There are two commonly used types of SBA loans:

• SBA 7(a) Loans: Flexible use, including buying or improving commercial property.
• SBA 504 Loans: These loans are meant specifically for fixed assets like real estate and equipment.

3. Bridge Loans

Need fast cash to buy or renovate a property before you qualify for a long-term loan? Bridge loans are short-term solutions—typically 12–24 months—that give you time to stabilize the property and refinance later.

At Gustan Cho Associates, our bridge loans are interest-only, easy to qualify for, and fund quickly with less paperwork.

4. Construction Loans

If you’re building a new commercial property from the ground up, a construction loan can help. These are short-term loans that cover materials, labor, and land costs. Once construction is finished, you can refinance into a traditional loan.

We even offer Spec Builder Loans for investors building 1–4 unit homes. These loans require 25% down on land and 100% construction financing if the value after completion is within 70% LTV.

5. Hard Money Loans

Hard money loans are a type of commercial real estate loans that can help investors who need money quickly or cannot get regular loans. These loans focus more on the value of the property rather than your credit score. They usually have terms that last one year, with payments that only cover the interest. Investors often need to pay a 25% to 30% down payment. Interest rates for these loans range from 10.99% to 15.99%. Hard money loans are useful for buying properties that need repairs, are being sold at auction, or do not currently earn income.

6. Commercial Line of Credit

If you own commercial real estate, you might need money for upgrades, repairs, or everyday costs. A commercial line of credit can help with this. This type of loan gives you access to flexible cash whenever needed. You only pay interest on the money you actually use, which is helpful for property owners. Whether you need to fix a leaky roof or buy new equipment, a commercial line of credit makes it easier to cover these ongoing expenses. It’s a smart choice for anyone managing commercial properties.

Loan Terms You Should Know

Most commercial real estate loans don’t follow the same rules as home loans. They typically:

• Have adjustable rates
• Are amortized over 20–30 years
• Include 5–10-year terms with balloon payments

The rate usually includes a margin + index (like SOFR or CMT). Once the fixed period ends, your rate adjusts yearly based on that index.

How Much Can You Borrow?

When looking for commercial real estate loans, lenders use Loan-to-Value (LTV) to determine how much money you can borrow. Most of the time, loans can be given for about 70% to 80% of the property’s value. You’ll need to use your money or get investors’ funds to cover the rest. Knowing how LTV works is important so you can plan your finances properly.

Qualifying for Commercial Real Estate Loans

Getting approved for commercial real estate loans depends on a few things:

• Property Income: Lenders look at the building’s rental income.
• Credit & Experience: Good credit helps, but your experience as an investor or business owner matters too.
• Down Payment: Expect to bring 20-30% to the table.
• Business Plan: A clear plan is a must for new projects or construction.

We can also help you build business credit to qualify for commercial lines of credit and unsecured business credit cards.

Why Work With Gustan Cho Associates?

We’re not just mortgage experts—we’re investors, too. Gustan Cho has managed over 3,000 rental units and knows what it takes to structure smart commercial real estate loans.

Whether buying your first strip mall or developing a mixed-use property, we’ll guide you every step of the way and tailor the financing to your deal.

We offer:

• Non-recourse loan options
• Fast closings on bridge and hard money loans
• Flexible construction and spec-builder loans
• Personalized loan planning with experts

Recent Updates in 2025 You Should Know

• Higher interest rates have tightened traditional lending, making alternative financing like hard money more popular.
• Retail and office space demand is shifting, with more conversions to mixed-use or flexible workspaces.
• SBA loans continue to be among the most effective financing options for small business owners because of their low down payment requirements and extended repayment terms.
• AI underwriting is speeding up approvals and reducing red tape for bridge and private lending.

Ready to Explore Your Options?

Whether you’re investing in a retail strip, building a 6-unit apartment, or converting an old office into a co-working space, we’ve got you covered. Commercial real estate loans don’t have to be complicated when you work with the right team.

Contact Gustan Cho Associates today to get matched with the best commercial loan program for your investment goals. Borrowers who need a five-star national mortgage company licensed in 52 states with no overlays and who are experts on commercial real estate loans, please contact us at 800-900-8569, text us for a faster response, or email us at gcho@gustancho.com. Get pre-qualified and start your investment journey today!

Frequently Asked Questions About Commercial Real Estate Loans:

Q: What are Commercial Real Estate Loans?

A: Commercial real estate loans are loans you use to buy or refinance buildings like apartment complexes, retail stores, or office buildings. These properties are meant to make money or be used for business.

Q: Can I Get Commercial Real Estate Loans with Bad Credit?

A: Yes, it’s possible. Some lenders, like Gustan Cho Associates, offer options like hard money loans that look more at the property’s value than your credit score.

Q: What’s the Difference Between Commercial Real Estate Loans and Home Loans?

A: Home loans are for personal homes, while commercial real estate loans are for investment or business properties. Commercial loans also look at how much income the property generates.

Q: How Much do I Need for a Down Payment on Commercial Real Estate Loans?

A: Most commercial real estate loans require a 20% to 30% down payment of the property’s value. Some loans, like SBA loans, may allow for a lower down payment.

Q: What Types of Properties Can I Buy with Commercial Real Estate Loans?

A: Commercial real estate loans can be used for apartment buildings (5+ units), retail spaces, warehouses, office buildings, and mixed-use buildings that combine living and business space.

Q: What are Non-Recourse Commercial Real Estate Loans?

A: Non-recourse commercial real estate loans protect your personal assets. If you can’t pay the loan, the lender can only take the property, not your savings or other belongings.

Q: How Long are Commercial Real Estate Loans?

A: Commercial real estate loans usually last between 5 and 30 years. Many have balloon payments after 5 to 10 years or adjustable interest rates after a fixed period.

Q: Can I Get a Loan to Build a Commercial Property from Scratch?

A: Yes. Construction and spec-builder loans are commercial real estate loans that help pay for land, materials, and building costs from the ground up.

Q: What’s a Hard Money Loan in Commercial Real Estate?

A: Hard money loans are short-term loans used to buy or fix up a property quickly. These commercial real estate loans are based on the property’s value and usually close quickly.

Q: How do I Apply for Commercial Real Estate Loans with Gustan Cho Associates?

A: Call, text, or email Gustan Cho Associates to get started. We’ll help you choose the best commercial real estate loan based on your goals, property type, and budget.

This blog about “Simple Guide to Commercial Real Estate Loans” was updated on May 9th, 2025.