Commercial Mortgages
Commercial Real Estate Loans & Mortgages
Commercial Real Estate Loans & Mortgages
Commercial real estate financing is generally categorized into two distinct types: owner-occupied mortgages and investment mortgages. A property is classified as owner-occupied when the principal business operating within the mortgaged premises utilizes more than half of the building’s total usable area. Conversely, if this criterion is not met, the property is considered an investment property. Eligibility for commercial loans necessitates adherence to zoning regulations, specifically prohibiting residential zoning designations or the presence of residential units on the premises. Leveraging our established network of wholesale programs with diverse financial institutions, we are positioned to provide exceptionally competitive interest rates, characterized by the absence of upfront fees and diminished overall financing expenses. While Prosper Financing maintains an open approach to evaluating various property types, our primary focus encompasses office buildings, retail spaces, industrial facilities, hospitals and healthcare centers, self-storage facilities, hotels, mixed-use developments, and religious institutions.
If you are looking to finance an apartment complex, click here: Apartment Loans.
Mortgage Programs
Top 8 Commercial Loan Programs
- Conventional Financing (O/O or Investment)
- Conduit / CMBS Financing (Investment)
- Insurance Financing (Investment)
- FHA Financing – Hospitals or Senior Care (O/O or Investment)
- SBA Financing (O/O)
- USDA Financing (O/O or Investment)
- Bridge Financing (O/O or Investment)
- Construction Financing (O/O or Investment)
Conventional Mortgages
Traditional mortgage products are applicable across a spectrum of real estate asset classes. While loan-to-value ratios generally fall within a standard range, certain markets and specific scenarios may permit maximum leverage of up to 75-85%. Recourse to the borrower via personal guarantees is a common stipulation; however, the requirement for, or extent of, such guarantees is subject to variance based on factors such as the loan-to-value ratio and the particular mortgage program utilized.
| Loan Type | Property Type * | Min Loan Amount | Max LTV | Term Length | Amortization |
|---|---|---|---|---|---|
| Conventional | A, H/M, I/W, M/H, MU, O, R, SS | $1,000,000 | 80% | 3–15 Years | 15–30 Years |
*A = Apartment H/M = Hotel/Motel I/W = Industrial/Warehouse M/H = Medical/Healthcare MU = Mixed Use O = Office R = Retail SS= Self-Storage
Conduit / CMBS Mortgages
Conduit mortgages, generally employed for financing income-producing properties such as office buildings, retail centers, large-scale industrial facilities, self-storage businesses, franchised hotels, or mixed-use commercial developments, typically involve a minimum loan amount of $2 million, with a preference for $3 million or higher. Loan-to-value ratios are capped at 75%, and the financing is invariably structured as non-recourse, subject to standard carve-out provisions. Given that these mortgages are ultimately securitized and distributed to investors, they exhibit a high degree of standardization and limited flexibility for modification.
| Loan Type | Property Type * | Min Loan Amount | Max LTV | Term Length | Amortization |
|---|---|---|---|---|---|
| Conduit / CMBS | A, H/M, I/W, M/H, MU, O, R, SS | $2,000,000 | 75% | 5–10 Years | 20–30 Years |
*A = Apartment H/M = Hotel/Motel I/W = Industrial/Warehouse M/H = Medical/Healthcare MU = Mixed Use O = Office R = Retail SS= Self-Storage
Insurance
Insurance companies primarily offer mortgage financing for income-producing commercial properties such as office buildings, retail centers, industrial facilities, and, to a lesser extent, well-established hotels. Loan-to-value ratios generally cap at 65-70%, although select transactions may permit up to 75% leverage. While the majority of these financing programs stipulate a minimum loan size of $5 million, certain lenders may consider smaller amounts. Recourse provisions can vary, with mortgages structured as full, limited, or non-recourse, subject to standard carve-outs for specific events..
| Loan Type | Property Type * | Min Loan Amount | Max LTV | Term Length | Amortization |
|---|---|---|---|---|---|
| Insurance | A, H/M, I/W, MU, O, R | $1,000,000 | 75% | 5–30 Years | 15–30 Years |
*A = Apartment H/M = Hotel/Motel I/W = Industrial/Warehouse MU = Mixed Use O = Office R = Retail
FHA Hospital or Senior Care Loans
Through its Sections 202, 232, and 242, the Federal Housing Administration (FHA) enables the financing of healthcare properties, including hospitals and facilities catering to the elderly. Acceptable collateral generally encompasses a range of healthcare real estate, such as acute care hospitals, specialized memory care units, skilled nursing centers, and assisted living communities. Loan-to-value ratios can reach up to 90%, and these mortgages are generally structured as non-recourse loans, subject to standard exceptions typically included in such agreements.
| Loan Type | Property Type * | Min Loan Amount | Max LTV | Term Length | Amortization |
|---|---|---|---|---|---|
| FHA / HUD | A, AH, C, H, MC, SH, SNF | $3,000,000 | 83.3% | 35–40 Years | 35–40 Years |
*A = Apartment AH = Affordable Housing C = Cooperative H = Hospitals MC= Memory Care SH = Senior Housing SNF= Skilled Nursing Facilities
SBA Financing
Through its 7(a) and 504 loan programs, the Small Business Administration (SBA) enables access to mortgages with loan-to-value ratios of 85-90% for properties occupied by the owner. This is achieved by the SBA guaranteeing these loans, thereby mitigating lender risk. Acceptable collateral may encompass diverse forms of commercial real estate assets, potentially including capital equipment, provided that the borrowing entity occupies a majority (exceeding 50%) of the property’s total square footage. It is crucial to note that all SBA-backed mortgages are executed with full recourse to the borrower.
| Loan Type | Property Type * | Min Loan Amount | Max LTV | Term Length | Amortization |
|---|---|---|---|---|---|
| SBA | A, H/M, I/W, M/H, MU, O, R, SS | $1,000,000 | 85-90% | 3–25 Years | 15–30 Years |
*A = Apartment H/M = Hotel/Motel I/W = Industrial/Warehouse M/H = Medical/Healthcare MU = Mixed Use O = Office R = Retail SS= Self-Storage
USDA Mortgages
The United States Department of Agriculture (USDA) provides mortgage guarantees applicable to various commercial real estate assets situated within officially designated rural zones, defined as areas with a population not exceeding 50,000 residents. While certain USDA programs may permit a loan-to-value (LTV) ratio of up to 90%, the majority typically cap LTV at 80-85%. It is important to note that USDA-backed mortgages are predominantly structured as full recourse loans, exposing borrowers to broader liability.
| Loan Type | Property Type * | Min Loan Amount | Max LTV | Term Length | Amortization |
|---|---|---|---|---|---|
| USDA | A, H/M, I/W, M/H, MU, O, R, SS | $1,000,000 | 90% | 5–15 Years | 15–30 Years |
*A = Apartment H/M = Hotel/Motel I/W = Industrial/Warehouse M/H = Medical/Healthcare MU = Mixed Use O = Office R = Retail SS= Self-Storage
Bridge Financing
Bridge loans facilitate minor renovations or stabilization efforts for commercial real estate investments or properties occupied by their owners. While underwriting considers projected future cash flows, existing net operating income must still demonstrate a debt service coverage ratio (DSCR) of at least 1.0x. Most bridge loan programs typically require a personal guarantee from the borrower.
| Loan Type | Property Type * | Min Loan Amount | Max LTV | Term Length | Amortization |
|---|---|---|---|---|---|
| Bridge | A, I/W, M/H, MU, O, R, SS | $3,000,000 | 90% | 12–36 Months | Interest-Only |
*A = Apartment I/W = Industrial/Warehouse M/H = Medical/Healthcare MU = Mixed Use O = Office R = Retail SS= Self-Storage
Construction Mortgages
Construction financing addresses the needs of ground-up development or extensive renovation projects where properties lack sufficient cash flow to meet standard debt service coverage ratio (DSCR) requirements of 1.0x. These financing instruments typically feature interest-only payments during the construction phase, transitioning to either a fully amortizing loan upon stabilization or necessitating a refinance. The loan amount and loan-to-value (LTV) ratio are contingent upon the specific financing program utilized for the project.
| Loan Type | Property Type * | Min Loan Amount | Max LTV | Term Length | Amortization |
|---|---|---|---|---|---|
| Construction | A, I/W, M/H, MU, O, R, SS | $3,000,000 | 80% | 12–36 Months | Interest-Only |
*A = Apartment I/W = Industrial/Warehouse M/H = Medical/Healthcare MU = Mixed Use O = Office R = Retail SS= Self-Storage