Best pricing for borrowers that can provide full income and asset documentation and have higher credit scores.
Conventional commercial loans reward borrowers who can fully document income and assets and carry higher credit scores. If that’s you, this is usually the lowest-cost path to financing an investment property.
A conventional commercial real estate loan is financing provided by a bank, credit union, or private lender that is not guaranteed by a government agency — unlike an SBA loan, which carries a partial federal guarantee. Because the lender takes on the full risk, approval leans heavily on the strength of the borrower and the property: credit history, documented cash flow, collateral, and the property’s ability to service the debt.
Lenders commonly measure that last point with the debt-service coverage ratio (DSCR) — the property’s net operating income divided by its annual debt payments. For example, a property with $120,000 in net operating income and $100,000 in annual loan payments has a DSCR of 1.2, meaning it generates 20% more income than it needs to cover the loan. Most conventional lenders look for a DSCR of at least 1.20–1.25.
Interest rates on conventional commercial loans can be fixed or variable and are set by the borrower’s creditworthiness, the loan term, and prevailing market conditions. A few norms to expect:
Both finance commercial real estate, but they suit different borrowers:
| Conventional commercial loan | SBA loan | |
|---|---|---|
|
Government guarantee |
None |
Partially guaranteed by the federal government |
|
Best for |
Strong credit, full documentation, faster close |
Less collateral or shorter credit history |
|
Down payment |
Typically higher |
Often lower |
|
Paperwork & timeline |
Less; faster to close |
More; longer to process |
|
Pricing |
Best pricing for well-qualified borrowers |
Favorable terms, but more requirements |
Short version: if you have solid credit and can fully document income and assets, a conventional loan is usually cheaper and faster. If you’re short on collateral or credit history, an SBA loan may be easier to qualify for. Not sure which fits? Talk to a specialist →
Documentation for a conventional commercial real estate loan generally includes:
For construction loans, also:
Typical turnaround: 30–45 days.
It’s financing from a bank, credit union, or private lender that isn’t guaranteed by a government agency (unlike an SBA loan). Approval depends on the borrower’s credit, documented income, collateral, and the property’s cash flow.
Requirements vary, but generally include a strong credit score, a track record of business profitability, sufficient collateral, and a clear plan for the property. Lenders also evaluate the debt-service coverage ratio (DSCR) to confirm the property earns enough to cover its loan payments.
Rates can be fixed or variable, based on your creditworthiness, the loan term, and market conditions. Terms generally run 5 to 20 years, sometimes with a balloon payment at the end.
Often, yes — but some loans include prepayment penalties that compensate the lender for lost interest. The structure varies, so review your loan agreement carefully.
SBA loans are partially guaranteed by the federal government, which can make them easier to qualify for with less collateral or a shorter credit history, and they often have lower down payments. The trade-off is more paperwork and a longer timeline. Conventional loans offer the best pricing for well-qualified borrowers and typically close faster.
A $1,500–$2,500 refundable underwriting fee is usually collected upfront (non-refundable if you accept a written offer and the loan doesn’t close). Points of 1–2% are normally collected at closing, depending on the scenario.
You’ll be assigned to a Standout Commercial Loans expert who will guide you through the process.
Your loan expert will present you with the best available options for your loan.
