CRE loans and Capital Providers

Navigating Commercial Real Estate (CRE) Financing

Securing the right financing is a critical step in any commercial real estate venture.

With a diverse landscape of capital providers, understanding your options is key to a successful acquisition, development, or refinancing project.

At Montgomery Lending, we specialize in connecting you with the ideal lending solution for your unique needs.

Below, we detail the primary types of CRE loans and capital providers, offering insights into their typical terms, rates, and suitability for various projects.

Key Commercial Real Estate Capital Providers

Our interactive table provides a quick overview of different financing types, their typical loan sizes, terms, interest rates, and whether non-recourse options are generally available.

See The Table Here

Please note: Interest rates and terms are typical and subject to change based on market conditions, borrower creditworthiness, and specific deal characteristics.

In-Depth Look at Capital Providers

To help you make an informed decision, here's a detailed breakdown of each financing type, including their key advantages and disadvantages:

Bank Loans
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 (Commercial Mortgage-Backed Securities)

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 (504 & 7(a))

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)

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 (Commercial Property Assessed Clean Energy)

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.
 
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