The Five Kinds Of Commercial Real Estate Term Loans


Chinwe Onyeagoro, CEO, FundWell

[Today’s post is the first in an exciting new series on the intersection of commercial real estate and financing with special guest blogger and FundWell CEO Chinwe Onyeagoro. FundWell is part of the REach 2014 class of companies, recognized for their work to expand financing options for the commercial market. See FundWell’s website  for more info and stay tuned here on The Source for updates about how to register for our upcoming webinar with Chinwe later this month! –WG]

There are many different kinds of financing options for commercial real estate deals. And understanding the mix of commercial loan products available to you and your clients could make the difference between completing a transaction and losing it. 2013 was a very good year for commercial real property investors. According to CoStar COMPs data, sales of office, industrial, retail, multifamily, hospitality and land totaled $366 billion. The vast majority of these commercial real estate acquisitions were financed using third party firms like banks, non-bank SBA lenders, and commercial real estate lenders.

The Five Commercial Real Estate Loan Products

There are five basic types of commercial real estate term loan products. (A term loan is a loan with a specific, fixed principal amount and a set maturity date and repayment schedule, which does not include line of credit financing (e.g., revolving construction lines)).

  • Permanent Loan
  • Mini Permanent Loan
  • 7A Loan
  • 504 Loan
  • Bridge Loan

Below is a cheat sheet on these five loan products and some fun facts about each:

1. Permanent Loan

Description:  Conventional, long-term commercial real estate financing from a bank

Eligibility Criteria:  You must be near perfect. Translation: you need to have a 700+ credit score (or a good story as to why you don’t), lots of positive net cash flow businesses and/or investment properties, high balances in your business and personal bank accounts, and the property needs to have at least 1, but ideally 2 years of positive net operating income (NOI).

Permanent Loan Pros:

    • 15 to 30 year terms
    • Prime to near-prime interest rates


Permanent Loan Cons:

    • Hard to qualify
    • 30-60 days approval time


2. Mini Permanent Loan (Mini Perm)

Description:  Conventional, short-term commercial real estate financing from a bank

Eligibility Criteria:  You pretty much need to meet all of the criteria for a permanent loan, except the target property does not have to have positive net operating income (NOI). However, your Sources and Uses statement needs to show how you will use the loan funds to make the subject property income producing (e.g., acquire property, do construction/rehab, lease up, etc.) so you can qualify for long-term financing before your Mini Perm loan matures.

Mini Perm Pros:

    • 1 to 5 year terms
    • Prime to near-prime interest rates


Mini Perm Cons:

    • Hard to qualify
    • 30-60 days approval time


3. 7A Loan

Description: Alternative funding for commercial real estate, equipment, and/or working capital from a bank or non-bank lender certified by the U.S. Small Business Administration

Eligibility Criteria:  Can only be used by eligible small businesses. If you are close, but do not yet qualify for a conventional loan from a bank you may qualify for this funding.

7A Pros:

    • Up to 25 year terms
    • 6 to 10% interest rates
    • Can also use for working capital and equipment


7A Cons:

    • Max loan amount: $5 million
    • 30-60 days approval time


4. 504 Loan

Description: Alternative funding for commercial real estate and/or heavy equipment from a bank and a non-bank lender certified by the U.S. Small Business Administration

Eligibility Criteria:  Can only be used by eligible small businesses who own or occupy 51% or more of the commercial property. If you are close, but are not yet qualified for a conventional loan from a bank you may qualify for this funding.

504 Pros:

    • 10 to 20 year terms
    • 6 to 10% interest rates
    • Can also use for working capital and equipment


504 Cons:

    • Lots of paperwork required
    • 45-90 days approval time
    • Max loan amount: $20 million


5. Bridge Loan

Description: Alternative funding for commercial real estate from a private and/or hard money lender

Eligibility Criteria:  If you don’t yet qualify for funding from a 7A or 504 lender and you have a plan to acquire and/or improve an asset that will eventually secure better funding, then you may want to try a bridge loan. However, it won’t be a cake walk, the cardinal rule still applies. You need to show you have a history of mostly paying your bills on time (minimum 620 credit score) and enough cash flow from personal and investment income to cover the property operating expenses and the debt service (principal and interest) for all existing loans that you have and the new loan you are applying for.

Bridge Loan Pros:

    • 1 to 5 year terms
    • Easier to qualify


Bridge Loan Cons:

    • 10-20% interest
    • 30-60 days approval time


There they are: the five jewels of the commercial real estate financing market. Depending on who you are, what your financial profile is, and how you plan to use the commercial real estate, one or more of these loan products will be right for you.

Now that you have a good handle on what the options are and the pros and cons of each, you should take a look at your existing commercial real estate investment portfolio and make sure you are currently getting the best possible deal with respect to interest rate and term. If you are not, you could save yourself a lot of cash by refinancing. That’s cash that could be used to reinvest in your business, buy more commercial real estate properties, or reserve for a rainy day. And for those that work with and/or support commercial real estate investors, encourage them to explore their options and evaluate the financing on their current properties and/or planned purchases. If you help save them some money today, I can assure you, that you will continue to be their go to resource for commercial real estate in the future.


Chinwe is the CEO & Co-Founder of FundWell. Chinwe has a strong personal interest and a professional track record devoted to helping organizations raise capital. She co-founded, capitalized, and operated a boutique consulting firm that over the last seven years has successfully raised a total of $120 million in grants, competitive loans, tax incentives, government subsidies, and owner equity financing on behalf of clients across the country. Chinwe’s consulting experience includes McKinsey & Company, where she provided financial and strategic business advisory services to Fortune 1000 company executives, and while at Monitor Company (now owned by Deloitte) she provided strategy and financial analysis for public and private sector clients, and managed a $3 billion dollar real estate account. Chinwe has a B.A. in Economics from Harvard College and is a Henry Crown Fellow of the Aspen Institute.


FundWell ( is an online resource that prequalifies and connects commercial real estate investors and small businesses seeking funding with a growing number of bank loans, non-bank debt funding, and other credit related financing options.

FundWell delivers a 75% loan approval rate in a marketplace where they typically face a 30% approval rate. FundWell helps commercial real estate brokers increase deal flow and speeds up closings by referring their clients to prequalified lenders that will fund their real estate needs and business expansion plans. FundWell also helps real estate brokers access financing to grow their businesses.

Since 2012, FundWell’s online financing marketplace and financial health information has reached over 24,000 small businesses, working in partnership with over 300 lending partners across the country that span 13 different types of loan products from conventional bank loans and SBA loans to factoring, equipment loans and commercial real estate loans.


  • maria bowman

    September 9, 2014

    Have a commercial lot that is now under a mix-use planning zone and I need to put a group of investors together to purchase and construct project that can be up to five stories.

    Are there loans for investor groups? Do you know how they would qualified??? Do you have access to start up capital?
    Lot will cost about 500 to600K

    • Chinwe Onyeagoro

      October 6, 2014

      Good question Maria! Yes, there are commercial loans available for investor groups. An investor group would need to setup a legal entity (i.e., corporation or a partnership) and the lender will award the loan to that entity based on the credit scores, combined income, and cash savings of the investor group members. Yes, our lenders will fund commercial real estate investment companies that are just starting up. The key, though, is that the owners of the investment company have to be able to demonstrate that they have the funds to make the down payment on the lot and to cover the loan interest and principal payments for a period of 6 months.

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  • James S Shaw

    September 23, 2014

    Another wonderful post by the Fundwell . It give the basic knowledge that which Kinds Of Commercial Real Estate Term Loans are used in real estate business , Good post it give pros and cons of all the loans terms

    • Chinwe Onyeagoro

      October 6, 2014

      Thank you James! I appreciate the feedback. Please let me know if there are other commercial real estate financing topics that you would like to me to include in future blog posts.

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