According to a recent Forbes survey, 26.8% of business owners apply for a business loan for commercial real estate purchases or remodeling. When it comes to financing business-related real estate or expansion opportunities, a commercial loan can be a powerful tool.
But how do you qualify for a commercial loan? In this article, we’ll walk you through the key requirements, loan types, and how a lender like SDC Capital can help you secure the funding you need in California.
Explaining Commercial Loans
A commercial loan is a type of financing offered to businesses or investors looking to purchase, refinance, or renovate income-generating real estate.
These loans differ from residential loans in that they’re designed for properties like office buildings, retail centers, multi-family units, industrial spaces, or even mixed-use developments.
Unlike traditional home loans, commercial loans are often evaluated based on the income potential of the property and the financial strength of the borrower or business.
Types of Commercial Loans
There’s a wide range of commercial loan options, each tailored to different property types and business needs.
Here are the most common types:
Permanent Loans: Long-term loans used to acquire commercial properties that can generate consistent income.
Bridge Loans: Short-term financing to “bridge” the gap until permanent financing is secured.
Commercial Construction Loans: These loans fund the ground-up development or major renovation of commercial properties. Funds are typically released in stages as construction progresses.
Commercial Auto Loans: Financing used by businesses to purchase vehicles for operational use, such as delivery vans, service trucks, or company cars.
Equipment Financing: A loan used to purchase business-critical equipment or machinery. The equipment often serves as collateral for the loan.
SBA Loans: Loans partially guaranteed by the U.S. Small Business Administration, offering lower down payments and longer terms.
Hard Money Loans: Asset-based financing for borrowers who need fast, flexible capital—often used for time-sensitive or non-traditional scenarios.
How to Qualify for a Commercial Loan
Qualifying for a commercial loan depends on several key factors. Lenders carefully assess risk and want to ensure you're financially positioned to repay the loan.
To improve your chances of approval:
Have a Strong Business Plan or Investment Strategy
Lenders want to see a clear breakdown of how the funds will be used and how you’ll repay the loan—whether through business revenue or income generated by the property.
Be ready to present a solid business plan, financial projections, and an exit strategy.
2. Maintain a Healthy Credit Profile
Both your business and personal credit history matter. A strong credit score (typically 680 or higher) signals reliability.
However, some lenders may work with scores as low as 650 if the rest of your financial profile is strong.
3. Demonstrate Cash Flow or Property Income
The property’s Net Operating Income (NOI) or your business’s revenue should comfortably cover the loan payments.
4. Showcase Collateral
Commercial real estate loans are usually secured by the property itself, but some lenders may also look for additional collateral or guarantees.
5. Prepare a Down Payment
Most commercial loans require a down payment of 20–30%. This shows lenders you’re invested in the success of the deal.
6. Experience Counts
If you’re investing in real estate, lenders may want to see a track record of successful property management or past real estate projects.
Common commercial loan eligibility criteria
While each commercial bridge lender may vary slightly, here are the general criteria you’ll need to meet:
Credit Score: 650+ (higher preferred)
Debt Service Coverage Ratio: 1.20 or higher
Loan-to-Value Ratio (LTV): Up to 75% depending on loan type
Down Payment: 20-30%
Property Type: Commercial use (retail, office, etc.)
Documentation: Tax returns, P&L statements, rent rolls, leases, business plan
Where to Get a Commercial Loan
There are several types of lenders that offer commercial loans, each with its own pros and cons:
Banks and Credit Unions – Offer competitive rates but strict qualifications
Private Lenders – Provide flexible options for unique deals or credit-challenged borrowers
Hard Money Lenders – Ideal for investors needing quick closings or non-traditional financing
SBA-Approved Lenders – Offer loans backed by the government for qualifying small businesses
Choosing the right lender depends on your timeline, credit profile, project complexity, and financial goals.
SDC Capital
At SDC Capital, we understand the unique challenges and opportunities in California’s real estate market.
As a private real estate lender based in the state, we specialize in bridge loans and commercial real estate financing for investors and business owners who need speed, flexibility, and certainty of execution.
Whether you're purchasing a commercial property, refinancing an existing loan, or need quick funding to seize an opportunity, we're here to help you qualify and close—fast.
Ready to get started?
Reach out to our team today and let’s talk about your next commercial real estate investment. Call us at 424-304-1072 or get a free quote today.