Capital Providers

 

Financing Type    Loan Size           Typical Term      Interest Rates       Non-Recourse?

Bank Loans     $500K - $75M+  5, 7, or 10 years   5.76% - 10.25%   Available

Credit Unions  $250K - $10M+  5, 7, or 10 years   5.76% - 10.25%    No

Fannie Mae    $750K - $100M+  5 - 30 years       5.45% - 6.92%     Yes

Freddie Mac   $1M - $100M+      5 - 10 years        5.59% - 7.06%     Yes

CMBS             $3M - $100M+    5 or 10 years       5.50% - 7.72%      Yes

Crowdfunding $1M - $10M+       1 - 3 years           6.79% - 13.04%   Available

Debt Funds     $1M - $100M+     1 - 3 years           8.88% - 15.13%    Available

FHA/HUD       $3M - $100M+    35 - 40 years      5.35% - 6.90%    Yes

Life Ins.           $2M - $100M+    5 - 15 years          5.35% - 6.80%    Yes

SBA CRE        $250K - $14M     5 - 25 years          5.54% - 8.25%    No

USDA CRE      $1M - $25M         Varies                   Varies                   No

Private Equity  $5M - $100M+    Varies                   Varies                  Varies

REITs              $10M - $100M+   Varies                   Varies                   Varies

High Net Worth $5M - $100M+ Varies                    Varies                   Varies

Family Offices $5M - $100M+   Varies                     Varies                   Varies

C-PACE          $1M - $100M+    Varies                     Varies                   Yes

Ground Lease $10M - $100M+50 - 99 years           Varies

 

Pros and Cons for each Capital Provider:

Bank Loans
Bank loans provide traditional financing for cash-flowing CRE projects, offering competitive rates for purchases, refinancing, or renovations.

Pros
Competitive interest rates (5.76%–10.25%) for cash-flowing properties.
Flexible terms (5, 7, or 10 years) for various project needs.
Non-recourse options available, reducing borrower risk.
Widely accessible for strong borrowers, ideal for stable projects.

Cons
Strict underwriting requires strong credit and property performance.
Slower approval times (45–60 days) compared to private lenders.
May not suit value-add or distressed assets due to conservative criteria.

Credit Union Loans
Credit unions offer competitive rates and personalized service for local CRE projects, supporting community-focused investors.

Pros
Competitive rates (5.76%–10.25%) and personalized service.
Supports community-focused investors, aligning with local growth.
Flexible prepayment options reduce early repayment penalties.
Suitable for smaller deals ($250K–$10M+), common in regional markets.

Cons
Recourse loans increase borrower liability.
Limited to smaller-scale or local projects, less ideal for institutional assets.
Fewer resources than banks, potentially slowing complex deals.

Fannie Mae Multifamily Loans
Fannie Mae provides non-recourse multifamily loans with competitive rates, ideal for stabilized apartment buildings or senior housing.

Pros
Non-recourse financing reduces borrower risk.
Competitive rates (5.45%–6.92%) and long terms (5–30 years).
Discounts for affordable or green properties.
High loan amounts ($750K–$100M+), ideal for large portfolios.

Cons
Strict underwriting requires 90%+ occupancy and strong borrower net worth.
Lengthy approval process due to agency requirements.
Limited to stabilized multifamily, excluding construction or non-residential CRE.

Freddie Mac Multifamily Loans
Freddie Mac’s Optigo program offers non-recourse financing for multifamily properties, with flexible terms for various asset types.

Pros
Non-recourse loans with competitive rates (5.59%–7.06%).
Flexible terms (5–10 years) and preferential pricing for affordable/green projects.
Supports apartments, senior living, and mobile homes.
High loan amounts ($1M–$100M+), suitable for large deals.

Cons
Strict underwriting requires high occupancy and experienced operators.
Borrower net worth must exceed loan amount.
Not suitable for non-multifamily or construction projects.

CMBS
CMBS loans provide non-recourse financing for stabilized office, retail, or multifamily assets, backed by commercial mortgage securities.

Pros
Non-recourse financing with low rates (5.50%–7.72%).
Long amortizations and interest-only periods enhance cash flow.
High loan amounts ($3M–$100M+), ideal for various stabilized assets.
Broad property applicability for stable CRE.

Cons
Complex, costly prepayment (defeasance) limits flexibility.
High legal and closing costs compared to bank loans.
Not suitable for development or value-add projects.

Crowdfunding Loans
Crowdfunding pools investor funds for bridge loans or construction financing, offering flexibility for smaller CRE projects.

Pros
Flexible bridge loans or construction financing ($1M–$10M+).
Accessible to diverse investors, broadening capital access.
Short terms (1–3 years) suit transitional needs.
Non-recourse options available, reducing risk.

Cons
Higher interest rates (6.79%–13.04%) increase costs.
Limited loan sizes restrict large-scale projects.
Variable lender reliability due to diverse platforms.

Debt Fund CRE Loans
Debt funds offer quick, flexible bridge loans for construction or renovations, ideal for transitional CRE projects.

Pros
Fast, flexible bridge loans ($1M–$100M+).
Non-recourse options available, appealing for high-risk projects.
Ideal for stabilization before permanent financing.
Quick approvals suit urgent needs.

Cons
High interest rates (8.88%–15.13%) raise costs.
Short terms (1–3 years) require quick stabilization.
Riskier for borrowers without clear exit strategies.

FHA/HUD Multifamily Loans
FHA/HUD loans provide long-term, non-recourse financing for multifamily properties, backed by government insurance.

Pros
Non-recourse financing with long terms (35–40 years).
Low interest rates (5.35%–6.90%) and affordable down payments.
High loan amounts ($3M–$100M+), suitable for large projects.
Government backing ensures stability.

Cons
Heavy paperwork and long approval times (90+ days).
Strict compliance and maintenance requirements.
Limited to multifamily, excluding other CRE types.

Life Insurance CRE Loans
Life insurance companies offer low-rate, non-recourse loans for stable CRE properties, prioritizing experienced borrowers.

Pros
Low, fixed rates (5.35%–6.80%) and non-recourse financing.
Long terms (5–15 years) with long amortizations or interest-only.
High loan amounts ($2M–$100M+), ideal for institutional CRE.
Conservative underwriting ensures reliable funding.

Cons
Strict criteria prioritize experienced borrowers and stable assets.
Low leverage limits loan-to-value ratios, requiring more equity.
Not suitable for value-add or high-risk projects.

SBA Real Estate Loans
SBA 504 and 7(a) loans support small businesses with high-leverage financing for owner-occupied CRE.

Pros
High leverage (up to 90% LTC) reduces down payments.
Competitive rates (5.54%–8.25%) and long terms (5–25 years).
Supports small businesses with loans ($250K–$14M).
Flexible use for working capital or improvements.

Cons
Recourse loans increase borrower liability.
Limited to owner-occupied properties, excluding investment CRE.
Lengthy approval process due to SBA requirements.

USDA Land and Real Estate Loans
USDA loans finance rural CRE projects, supporting affordable housing and economic development.

Pros
Low rates and flexible terms for rural CRE.
Accessible to borrowers with less-than-perfect credit.
Loan amounts ($1M–$25M) suit small to mid-sized projects.
Government backing enhances reliability.

Cons
Recourse loans require personal guarantees.
Restricted to rural areas (outside cities >50,000 people).
Variable terms and rates create uncertainty.

Private Equity
Private equity firms offer flexible debt or equity financing for CRE development or acquisitions.

Pros
Flexible debt or equity financing ($5M–$100M+).
Large capital pools support ambitious projects.
Tailored solutions fit unique project needs.
Less regulated, enabling creative structuring.

Cons
Variable terms and high costs (e.g., equity stakes) reduce control.
Complex negotiations and due diligence slow processes.
Often requires giving up ownership.

Real Estate Investment Trusts (REITs)
REITs provide debt or equity for income-producing properties, offering diversification and income.

Pros
Debt or equity financing for income-producing properties ($10M–$100M+).
Diversified portfolios reduce risk for large-scale CRE.
Professional management and high liquidity.
Regular income distributions for stable projects.

Cons
Variable terms complicate planning.
Focus on income-producing assets excludes development.
May involve equity stakes, reducing ownership control.

Ultra High Net Worth Individuals
HNW individuals offer flexible, fast financing for CRE with tailored terms.

Pros
Highly flexible terms (e.g., high LTV, interest-only) ($5M–$100M+).
Fast decision-making speeds up funding.
Valuable insights from experienced investors.
Tailored deals for unique or high-risk projects.

Cons
Variable terms and rates create uncertainty.
Dependence on individual preferences increases risk.
May require personal relationships or high fees.

Family Offices
Family offices provide flexible debt or equity financing, focusing on wealth preservation.

Pros
Flexible debt or equity financing ($5M–$100M+).
Fast approvals for trusted relationships.
Focus on wealth preservation aligns with long-term strategies.
Strategic advice from experienced investors.

Cons
Variable terms and high costs (e.g., equity stakes).
Access requires established networks, limiting availability.
Less predictable than institutional lenders.

C-PACE
C-PACE finances energy-efficient improvements via property tax assessments, enhancing property value.

Pros
Non-recourse financing for energy-efficient improvements ($1M–$100M+).
Repaid via property tax assessments, transferable upon sale.
Enhances property value and reduces energy costs.
Supports sustainability, appealing to green investors.

Cons
Limited to energy-efficiency upgrades, not general CRE financing.
Variable terms depend on local programs.
Adds tax assessment burden, impacting cash flow.

Ground Lease
Ground leases allow developers to lease land for long-term CRE projects, reducing upfront costs.

Pros
Reduces upfront costs by leasing land ($10M–$100M+).
Long terms (50–99 years) provide stability.
Retains ownership of improvements, maximizing control.
Ideal for prime locations without full purchase costs.

Cons
Variable financial terms complicate budgeting.
Long-term lease obligations limit flexibility.
Not suitable for projects requiring land ownership.