Commercial financing is not one product. Picking the wrong lane costs you basis points, flexibility, and sometimes the deal.
Local / regional bank
- Rate: SOFR + 250–350 (roughly 7–8% today).
- LTV: 65–75%.
- Term: 5-year fixed, 25-year amort, balloon.
- Recourse: Yes.
- Best for: $1–20M value-add or stabilized deals with a personal relationship.
Fast, flexible, priced on relationships. Full recourse and shorter terms.
Agency (Fannie / Freddie multifamily)
- Rate: T + 150–200 (~5.5–6.5% today).
- LTV: up to 75–80%.
- Term: 5, 7, 10, 12 yr; 30-yr amort.
- Recourse: Non-recourse.
- Best for: Stabilized 5+ unit multifamily. Best-in-class rates.
Rigid — occupancy minimums (~85%), DSCR minimums (1.25+), strict sponsor requirements.
CMBS (Conduit)
- Rate: T + 200–275.
- LTV: up to 70–75%.
- Term: 10-year, 30-year amort, balloon.
- Recourse: Non-recourse.
- Best for: Stabilized commercial $5M+. Long-term hold.
Painful servicing, defeasance prepay (very expensive to break early). Best for buy-and-hold.
Debt fund / private credit
- Rate: SOFR + 400–700 (~9–12%).
- LTV: up to 80% LTC, 70% LTV.
- Term: 2–5 yr, floating.
- Recourse: Often non-recourse.
- Best for: Transitional deals — value-add, lease-up, repositioning.
Priced high because the money is fast, flexible, and takes real risk.
SBA 504 / 7(a)
- Rate: ~7–9% (7(a)); low-5s fixed on 504.
- LTV: up to 90%.
- Term: 25 yr on real estate.
- Recourse: Yes, personal guarantee.
- Best for: Owner-occupied commercial and business-plus-real-estate combos.
Only for businesses occupying 51%+ of the space. Slow to close (60–90 days).
How to pick
| Situation | Best lane |
|---|---|
| Stabilized 5+ unit multifamily | Agency |
| Value-add multifamily | Debt fund → Agency at stabilization |
| Small commercial (<$5M) | Local bank |
| Owner-occupied business + RE | SBA 504 |
| $10M+ long hold | CMBS |
| Fast-close opportunistic | Debt fund / bridge |
The right structure is the difference between a great return and a mediocre one.