Financing Guide
Commercial Real Estate Financing
Reviewed and updated 2026-05-22 · Rate figures are a dated snapshot and move constantly — never a quote
Commercial real estate financing funds the purchase, refinance, or improvement of income-producing or owner-occupied property. Lenders underwrite primarily to the property’s cash flow: most require a debt service coverage ratio of 1.20x to 1.35x net operating income to debt service, and lend generally 65% to 75% for strong, stabilized assets. Underwriting takes weeks, so this is a tool for planned acquisitions and refinances, not urgent working capital.
How commercial property lenders decide
Two numbers drive most commercial real estate loan decisions: debt service coverage ratio and loan-to-value. Of the two, DSCR is usually the one that actually limits how much you can borrow.
DSCR — the cash flow test
DSCR is net operating income divided by annual debt service. A ratio of 1.25x means the property generates 25% more income than its loan payments require. In 2026, minimum requirements commonly sit at 1.20x to 1.35x net operating income to debt service, with riskier asset types such as office and retail pushed toward the higher end. Properties with stronger ratios — 1.50x and above — tend to earn the most competitive pricing.
LTV — the leverage test
Loan-to-value caps how much of the property’s value a lender will finance. For strong, stabilized assets in 2026, LTV generally runs generally 65% to 75% for strong, stabilized assets. Challenged property types may be held to 60–65%. DSCR and LTV work together: a marginal DSCR can constrain leverage well below the LTV the property would otherwise support.
Rate context
As of the update date above, Commercial mortgage rates starting around the high-5% to mid-6% range. Treat that strictly as a dated reference point — commercial mortgage rates move with the broader rate environment, and only a lender term sheet reflects a real, current quote.
Who commercial real estate financing fits
- Acquiring or refinancing owner-occupied or investment property
- Borrowers with a property to pledge as collateral
- Longer-horizon projects that justify a multi-year loan
When commercial real estate financing is the wrong choice
- Funding is needed in days — CRE underwriting takes weeks
- There is no qualifying property or sufficient equity
- The need is short-term working capital, not a property play
How PMF fits in
Premier Merchant Funding, which publishes this site, arranges commercial real estate financing alongside its other commercial finance products. If a property loan suits your situation, PMF can help place it. This guide is written to explain the mechanics accurately on their own terms.