6 Ways to Finance Your Deal in a Volatile Market

Liquidity is there. Knowing which structure to ask for is the harder part. The Federal Reserve’s first rate increase in three years has not closed the debt markets, but it has sharpened them. Against that backdrop, with energy-driven inflation keeping further increases on the table, the first question almost every deal sponsor looking to acquire new property is now asking is “how much in loan dollars can you get me and what is the rate?”

It’s a fair question in any climate, but even more so today than even two months ago. The uncertainties of a volatile rate climate do have the potential to upend a transaction if careful attention is not paid to the myriad options available in a market flush with debt capital access. The Mortgage Bankers Association forecast commercial mortgage originations of $805.5 billion for 2026, and the refinancing pipeline driving that volume runs well into 2027. Six approaches are worth working through before you accept the first quote you get.

1. Reverse engineer the return

A useful technique to help identify sticking points and available options is to start with where you want to end up in terms of ultimate return on investment, and then work backwards from there. It will help inform how much leverage you will need with available equity on hand, what programs will underwrite to current or anticipated debt service bandwidth and if the transaction valuation can align with the current cost of capital. A sponsor targeting a stabilized long-hold return will arrive at a very different lender list than one underwriting the same building to a three-year value-add plan. Same asset, same price, different debt. This approach can be an effective exercise to identify the best available loan program before you start making calls.

2. Make lenders compete

Identifying the lender with the right loan program is key in a volatile market climate where lender access, competition and liquidity remain strong. Lean into relationships and then cast a wider net. This can motivate a relationship lender to shift their position to secure the allocation or identify a more viable option from an alternative source across the many banking, insurance company, CMBS, debt fund or agency lenders active in the marketplace. In markets like Los Angeles, Dallas and Atlanta, that has recently meant life companies quoting fixed-rate terms much more aggressively, which gives a borrower real leverage against a relationship bank. Understanding lender criteria, where they are flexible and their target allocations is the critical step to optimizing loan outcomes. Relationship lenders deserve your loyalty but should be held to market pricing to win the business. Search the widest universe possible.

3. Stretch senior: a bet on the business plan

It may seem counterintuitive to go into a transaction at negative leverage through traditional underwriting criteria, but rest assured, lenders see the value of experience and realistic potential. The ability to add value to an acquisition and achieve permanent stability in a timely, programmatic manner clearly articulated in a comprehensive business plan based on real-world experience can help secure permanent financing in advance of target stability. A new tenant in tow to backfill a vacancy, a rising tide of local economic fundamentals or under-market rents resetting in timely fashion can provide the necessary underwriting confidence with the right lender to secure a fixed-rate permanent loan at higher proceeds in advance of stabilization. Picture a sponsor acquiring a partially vacant flex building with a signed lease from a credit tenant who takes occupancy in month eight. Conventional underwriting sees today’s rent roll. A stretch senior underwrites the lease. These loans often come with an interest-only period included to enhance upfront cash flows. In lieu of more equity, a stretch senior is a strategic bet on vision.

4. CMBS: maximum proceeds, minimum flexibility

For borrowers looking to maximize leverage to the last possible dollar in a non-recourse format, CMBS is a relevant option. Some loans for qualifying assets are even able to underwrite to interest-only debt service. Trepp has the market tracking toward roughly $140 billion of private-label issuance in 2026, ahead of its own original $130 billion forecast and a third straight year of growth. It’s worth noting where that volume is going. Roughly three-quarters of the 2026 issuance announced to date has been single-asset, single-borrower rather than conduit, which matters for any borrower weighing servicing flexibility. Investor comfort with five-year term securities has provided a competitive option in a market looking for future near-term flexibility in hopes of an improving rate climate, albeit in what is an inflexible structure. There are still some drawbacks that exist for making CMBS a primary choice, mainly due to servicing rigidity, stringent underwriting, the cost of B-piece underwriting and rate uncertainty until closing. Regardless, achieving maximum proceeds high into the capital stack can be appealing.

5. Floating rate by choice, not by default

In a volatile cycle where additional Fed rate increases are expected if not assured, the benefits of a variable-rate loan can feel more perilous today than even two months ago. Still, the current cost of floating-rate debt can often price below Treasury-benchmarked fixed-rate options. That gap is a function of the current shape of the curve rather than a permanent feature, and a majority of Fed officials projected at least one further increase this year. So treat it as a window, not a trend. The decision to go with a variable rate should be made with confidence rather than as a last resort. If performance exceeds debt service comfortably at the outset and the purchase basis reflects value-add expectations, a variable rate can be an attractive option, assuming the property is positioned to weather any future cost increase as market conditions evolve.

6. Bridge debt: plan the exit first

Traditional bridge loans in two- or three-year formats with mini-perm extension options up to five years can provide the necessary capital to acquire, stabilize and prepare a target asset for a future permanent refinance. Both fixed-rate and floating-rate loans are available, and sources include insurance companies and banks seeking yield and higher-priced debt funds seeking the same. Those extension options are rarely automatic. They typically condition on meating a debt yield or coverage test, and the interest reserve sized at closing is what buys you the time to get there. The key to bridge debt is exit planning—for both the lender and borrower.

No doubt the post-pandemic market shfit has offered its fair share of challenges. Finding the necessary debt to close a transaction in a market flush with options shouldn’t be one of them. Another $652 billion of commercial mortgages comes due in 2027 and, per the MBA, the refinancing queue thins from this year’s $875 billion, but it does not disappear and lenders set their allocations early. The key to the months ahead is to start early, search widely, and choose wisely.

Please note: To become a Viewpoint writer, reach out to Therese Fitzgerald at therese.fitzgerald@cpe-mhn.com. All Viewpoints are copyright of Commercial Property Executive. We do not accept AI-written content.

Stephan Coste is senior director for Gantry.