Category: CRE Financing & Lending

SBA 7(a) financing is a flexible option for a business that needs property as part of a broader operating plan. One loan can finance owner occupied real estate, a business acquisition involving real estate, construction and working capital. The maximum SBA 7(a) loan is $5 million, while real estate financing can extend for up to 25 years. Those features can reduce the need to assemble separate property and operating facilities. The program is not designed for a passive investment property. For an existing building purchase, the operating business must occupy at least 51% of the property. That distinction should be resolved before a borrower spends time collecting lender proposals, because occupancy affects whether the transaction fits the program at all.

The right lender is not necessarily the bank with the largest commercial real estate portfolio. FDIC data can show which institutions hold substantial owner occupied commercial property loans, but it does not establish that a bank will approve a particular SBA request or offer the best structure. Each lender sets its own credit terms within SBA program rules. Borrowers should compare how lenders treat the property purchase, business acquisition, construction component and working capital request. Pricing also requires a current comparison because SBA rules cap rates as a spread over the Prime rate. With Prime at 7.00% as of Oct 26, 2026, the quoted spread and loan structure determine how competing proposals compare at the time of application.

SBA 7(a) financing combines property and business needs

The SBA 7(a) program can place several related financing needs into one loan. Eligible uses include owner occupied real estate, a business acquisition with real estate, construction and working capital. This flexibility matters when the property is only one part of a larger transaction. A buyer acquiring an operating company and its building, for example, may prefer one coordinated credit structure rather than separate facilities with different lenders. The maximum SBA 7(a) loan is $5 million, so the combined request must fit within that limit. Borrowers should define every intended use before approaching lenders, because the allocation among property, construction, acquisition and working capital shapes the proposed structure. Each lender applies its own credit standards while operating within the SBA program rules.

The SBA supports participating lenders by covering 85% of loans up to $150,000 and 75% of larger loans. That support lets lenders accept less equity than a conventional loan, although the actual borrower contribution remains lender specific. The program still requires a lender to approve the underlying transaction. For an existing building purchase, the business must occupy at least 51% of the property, making operating use central to eligibility. A property acquired primarily for tenants does not match that occupancy rule. Borrowers should therefore describe how the business will use the building and ensure that the proposed transaction reflects the operating company’s needs. The lender will determine its own terms and whether the complete request meets its credit requirements and SBA program rules.

The structure can extend through a long real estate term

Real estate financed through an SBA 7(a) loan can have a term of up to 25 years. The available term can align the financing with a long lived property while keeping associated business needs inside the same loan request. The maximum loan remains $5 million, including the financed uses covered by the transaction. A borrower should not assume that every eligible request receives the maximum amount or longest term. Each lender sets its own structure after reviewing the transaction and applying SBA program rules. The proposed uses also matter because a request may combine an owner occupied building with construction, a business acquisition or working capital. Comparing term sheets requires separating the real estate component from the other uses and confirming how each part is treated within the proposed facility.

Equity requirements are not stated as one universal percentage in the program facts used by BestCRE. The SBA support of 85% for loans up to $150,000 and 75% for larger loans can allow less equity than conventional financing, but each lender determines the contribution it will require. The same principle applies to collateral treatment, repayment structure and other credit conditions that are not fixed here. Borrowers should ask each lender to state the requested equity, approved uses, loan term, pricing basis and any conditions in a comparable format. A proposal with a longer term may differ materially from one with a lower initial rate or a different treatment of working capital. The complete structure, rather than any single quoted feature, should drive the comparison.

FDIC balances identify banks with substantial owner occupied portfolios

FDIC figures as of June 30, 2026 show 4,167 banks reporting commercial real estate loans, with $3.07 trillion in total commercial real estate exposure. Owner occupied commercial real estate loans totaled $711.3 billion, and 3,933 banks reported some owner occupied balances. Bank of America, N.A. ranked first with $24.7 billion of owner occupied commercial real estate loans and $79.9 billion of total commercial real estate loans, with growth of +6.1%. Wells Fargo Bank, N.A. and Truist Bank each reported $17.8 billion of owner occupied balances. Their total commercial real estate portfolios were $121.6 billion and $51.0 billion, with changes of +0.3% and +4.9%, respectively. These figures describe portfolio size and growth, not SBA product availability.

First-Citizens Bank & Trust Company reported $16.8 billion in owner occupied loans, followed by JPMorgan Chase Bank, N.A. at $14.4 billion and The Huntington National Bank at $13.3 billion. The Huntington National Bank recorded commercial real estate growth of +109.8%. Fifth Third Bank, N.A. reported $12.0 billion in owner occupied loans and growth of +104.4%, while Pinnacle Bank reported $9.5 billion and growth of +123.7%. FDIC balances can help borrowers form a bank call list, but they do not confirm current SBA participation, approval standards, pricing or geographic coverage. BestCRE does not name a nonbank lender in this guide. Borrowers considering a nonbank option should independently confirm its lender type, current program participation and transaction terms before comparing it with bank proposals.

Source: FDIC Call Reports as of June 30, 2026. Banks ranked by owner occupied cre loans held on balance sheet. Bank names link to each bank’s FDIC record. See the full Best CRE Lenders ranking.

Eligibility begins with operating use of the property

For an existing building financed with an SBA 7(a) loan, the business must occupy at least 51% of the property. That requirement makes the operating company’s use of the space the first qualification question. A borrower should be prepared to explain which portions support its operations and which portions, if any, serve another use. The program can also finance a business acquisition with real estate, construction and working capital, so qualification should be assessed across the entire request rather than the building alone. The maximum loan is $5 million. If the combined financing need exceeds that amount, the borrower must determine whether the request can be restructured or whether another financing approach is more suitable. Each lender makes its own credit decision within the program rules.

A useful lender conversation starts with a clear description of the transaction: an existing owner occupied purchase, a business acquisition involving property, construction, working capital or a combination of those uses. The borrower should ask what information the lender needs to evaluate the operating business, the property and the complete financing request. The facts in this guide do not establish universal lender tests beyond the program’s occupancy requirement, maximum loan and permitted uses. Consequently, borrowers should not treat one bank’s requested structure as a programwide rule. The lender sets its own terms and determines whether the request satisfies its credit standards. Getting those requirements in writing makes it easier to identify differences among proposals without mistaking a lender preference for an SBA requirement.

Pricing starts with Prime and varies by lender spread

SBA rules cap loan rates as a spread over the Prime rate. Prime was 7.00% as of Oct 26, 2026, making it the central benchmark for reviewing a quoted SBA 7(a) rate. The applicable cap spread is not stated here, so borrowers should ask each lender to identify the Prime rate used, the spread applied and how the quoted rate complies with SBA rules. A comparison should use proposals prepared at the same point in time because the benchmark can change. The lender’s spread is only one part of the structure. The requested loan amount, approved uses, equity contribution and term can also distinguish competing offers. Each lender sets its own terms within the program rules, and the final proposal should state those terms clearly.

Other capital market benchmarks provide context but do not replace the SBA pricing rule. As of Oct 26, 2026, SOFR was 3.89%, the 5 year Treasury was 4.78%, the 10 year Treasury was 4.96% and Fed funds was 3.88%. Those readings show the broader rate setting at the same date as the 7.00% Prime rate. They should not be substituted for Prime when evaluating a rate capped under SBA rules as a spread over Prime. Borrowers should request a written explanation of the pricing basis and compare lender proposals using the same benchmark date. Where fees, spread details or other costs are not stated in this guide, the lender should identify them directly. The total financing structure is more informative than a benchmark viewed by itself.

The program fits operating properties better than passive investments

SBA 7(a) financing fits transactions in which an operating business needs real estate and may also need acquisition, construction or working capital financing. Its term of up to 25 years and maximum loan of $5 million can support a substantial owner occupied transaction. The required occupancy of at least 51% for an existing building is the clearest dividing line. A primarily passive property investment does not fit that rule, while a business using most of an acquired building may fit, subject to lender approval and the remaining program requirements. Another option may be more suitable when the financing need exceeds the program maximum, the business cannot satisfy the occupancy requirement or the borrower wants a structure that does not depend on SBA program rules.

Comparing offers begins with a common transaction description and a consistent set of questions. Each lender should address the approved loan amount, permitted uses, required equity, term and pricing spread over Prime. Borrowers should also confirm whether the proposal covers the real estate, business acquisition, construction and working capital needs intended for the transaction. FDIC owner occupied portfolio balances can identify banks familiar with this broad asset category, but those figures do not establish a specific lender’s SBA offering or approval appetite. A sound comparison separates SBA requirements from lender specific conditions and evaluates the whole package at the same point in time. BestCRE’s view is that the best proposal is the one that fits the operating use, financing need and repayment structure without relying on assumptions that are absent from the lender’s written terms.

Frequently Asked Questions

Can an SBA 7(a) loan finance a building with tenants?

Yes, but the operating business must occupy at least 51% of an existing building purchased with the loan. That rule allows some space to have another use while keeping the property principally owner occupied. The borrower should explain how the building will be used and ask the lender how it will document compliance with the occupancy requirement. The rule makes SBA 7(a) financing different from financing intended primarily for a passive rental property. Each lender still sets its own credit terms and decides whether the complete transaction is acceptable. The occupancy test is therefore an eligibility starting point, not a promise that a loan will be approved.

Can an SBA 7(a) loan cover a business purchase and its real estate?

Yes. SBA 7(a) financing can cover a business acquisition with real estate, allowing both elements to be included in one loan request. Construction and working capital can also be financed through the program. The combined SBA 7(a) loan cannot exceed $5 million. Borrowers should give prospective lenders a clear allocation of the requested funds so each proposal addresses the same transaction. A lender may structure the request according to its own credit standards while following SBA program rules. Comparing written proposals is especially important when the loan serves several purposes, because the term, required equity and treatment of each use may differ among lenders.

Can SBA 7(a) financing pay for construction and working capital?

Yes. Construction and working capital are permitted uses of SBA 7(a) financing and can be combined with owner occupied real estate in one loan. The total loan remains subject to the $5 million maximum. This structure can be useful when a property project and the operating business require coordinated financing, but each lender decides how it will evaluate and structure the request. Borrowers should identify the amount and purpose of each component and ask the lender to confirm which uses are included in its proposal. The written terms should make clear how the real estate, construction and working capital elements fit together, rather than presenting only one combined loan amount.

How much of an SBA 7(a) loan does the SBA support?

The SBA supports 85% of loans up to $150,000 and 75% of larger loans. This support lets lenders accept less equity than a conventional loan, but it does not create one required equity contribution for every borrower. Each lender sets its own terms and makes its own credit decision within SBA program rules. Borrowers should therefore ask for the required contribution in writing and compare it alongside the approved amount, term and pricing. The $5 million maximum SBA 7(a) loan also applies to the complete request. A lender’s requested equity may reflect its assessment of the entire transaction, including any real estate, acquisition, construction and working capital components.

Does a large FDIC owner occupied loan balance mean a bank is an SBA lender?

No. An FDIC owner occupied commercial real estate balance shows the size of that loan category on a bank’s books, not whether the bank currently offers SBA 7(a) financing. As of June 30, 2026, 3,933 banks reported some owner occupied commercial real estate loans, totaling $711.3 billion. Those figures help identify institutions active in owner occupied property lending broadly, but borrowers must confirm current SBA participation, geographic coverage and transaction requirements directly. The same caution applies to portfolio growth. A larger or faster growing commercial real estate portfolio does not establish a particular product, rate, term or likelihood of approval. FDIC data is a screening tool, not a substitute for a lender proposal.

Related BestCRE loan guides

CRE lenders by state

BestCRE loan guides are editorially independent. Program terms described are typical market conventions or official program rules; each lender sets its own terms after underwriting. BestCRE is not a lender and does not make loans. Benchmark rates are informational, not quotes. See our Legal Disclaimer and Compensation Disclosure.

Hard money loans serve property investors, developers and business owners who need a faster or more flexible closing than conventional financing may support. Private lenders focus mainly on the value of the collateral and the credibility of the exit. That structure can accommodate distressed assets, vacant buildings, renovation projects and transactions with compressed closing schedules. It also shifts attention toward execution risk. The borrower must understand how the property will be completed, sold or refinanced before the loan matures. Terms usually run 6 to 24 months and commonly require interest only payments, with origination points charged at closing. Each lender sets its own underwriting standards, documentation requirements and final terms, so an attractive headline rate does not establish which offer is the best fit.

The central tradeoff is straightforward. Hard money can provide speed and flexibility on property condition, borrower credit or timing, but it generally costs more than bank or agency debt. A useful comparison therefore begins with the transaction rather than the lender name. Borrowers should define the required closing date, current property value, renovation plan, expected holding period and intended exit. They should then compare how each lender treats leverage, construction funding, interest payments, origination points and maturity risk. BestCRE also reviews pricing against current market benchmarks because private loan quotes do not exist in isolation. As of Oct 26, 2026, the Prime rate was 7.00%, SOFR was 3.89%, the 5 year Treasury was 4.78%, the 10 year Treasury was 4.96% and Fed funds was 3.88%.

Hard money financing prioritizes collateral and the exit

A hard money loan is a short term loan from a private lender. Underwriting centers mainly on the property’s value and the planned exit rather than the borrower’s income. This makes the structure relevant when a conventional lender cannot accommodate the asset’s condition, vacancy, timing or credit profile. The property remains central because it supports repayment if the business plan does not proceed as expected. The exit is equally important because the loan is not designed as permanent financing. A borrower may plan to sell the property after improvements, refinance after stabilizing operations or replace the loan with long term debt once the asset qualifies. The lender evaluates whether that plan is realistic in relation to the collateral, project scope and maturity. Each lender applies its own rules and may view the same transaction differently.

The process usually begins with a description of the property, purchase or ownership status, proposed work and closing deadline. The lender then evaluates current value, the proposed use of proceeds and the route to repayment. For a fix and flip transaction, the structure may cover a share of the purchase price plus renovation cost. For a bridge transaction, proceeds may support a fast acquisition or provide time to complete a sale or long term refinance. Flexibility does not remove execution requirements. Borrowers still need a coherent project plan and an exit that can be assessed against the loan term. A lender may be comfortable with physical condition or vacancy yet remain cautious about uncertain value or an unclear repayment path. Hard money works best when the temporary financing need and the resolution of that need are both clearly defined.

Typical terms combine short maturities with controlled leverage

Hard money terms usually run 6 to 24 months and commonly use an interest only payment structure. Origination points are charged at closing. These are general market conventions, not uniform requirements, and each lender sets its own maturity, payment schedule, fees and closing conditions. The short term structure helps match the debt to a defined property event, such as completing renovations, selling the asset or arranging long term refinancing. It also creates a firm execution window. Borrowers should examine whether the proposed maturity provides enough time for construction, leasing, sale preparation or refinancing. They should also ask how the lender handles draws, payoff administration and any request to extend the loan. The available facts do not establish standard charges or policies for those items, so they must be confirmed directly in each lender’s written terms.

Leverage is usually constrained by collateral value and project risk. Hard money lenders typically lend 60% to 75% of current value. For fix and flip loans, a lender may instead finance a share of the purchase price plus renovation cost. The applicable method can materially affect the cash a borrower must contribute at closing and during construction. Current value, purchase price and renovation cost measure different parts of the transaction, so borrowers should identify which measure governs the commitment. They should also determine when renovation proceeds become available and what conditions control each release. A larger stated commitment may not provide more usable cash if substantial funds are held for later work. Because each lender establishes its own terms, comparison should focus on accessible proceeds, required borrower equity, payment obligations and the time allowed to complete the exit.

Private lenders and debt funds are the principal sources

There is no FDIC bank ranking for hard money lending because this program is principally associated with private lenders rather than a separately reported bank category. The FDIC reported 4,167 banks with commercial real estate loans and $3.07 trillion in total commercial real estate loans as of June 30, 2026, but those aggregate figures do not identify hard money originations or rank banks for this product. Banks may provide commercial real estate credit under their own programs, yet the available FDIC figures show only the scale of reported commercial real estate lending across banks. Borrowers seeking collateral focused, short term execution generally look to private hard money lenders and small balance debt funds. These lender types may differ in geography, asset preferences, funding process and underwriting approach, so classification alone does not establish suitability for a particular transaction.

Examples of private hard money lenders include Avatar Financial Group in Seattle, WA, Brookview Financial in Hamden, CT, Express Capital Financing in Brooklyn, NY and Genesis Capital in Sherman Oaks, CA. Examples of small balance debt funds include Capital Funding Group in Baltimore, MD, First Boston Capital Partners in Quincy, MA, First Continental in Houston, TX, Hirshmark Capital LLC in New York, NY, LendingOne in Boca Raton, FL, Maverick Real Estate Partners in New York, NY, Northlight Capital in Westport, CT and Urban Standard Capital in New York, NY. These descriptions identify headquarters and lender type only. They do not establish that a named firm will finance a particular property, market or business plan. Borrowers should contact prospective lenders directly to confirm current eligibility, coverage, underwriting requirements and terms.

Nonbank lenders shown alphabetically as examples of the lender types active in this category. Inclusion is not a ranking or an endorsement; confirm current programs with each lender.

Qualification depends on property value and a credible repayment path

Hard money underwriting places primary weight on the property’s value and the proposed exit rather than borrower income. A lender will want enough information to determine what the collateral is worth now, how the requested financing relates to that value and how repayment is expected to occur. For renovation transactions, the purchase price and renovation cost also matter because fix and flip financing may be structured around a share of both. Property condition is not automatically disqualifying, since borrowers often use hard money for distressed or vacant assets. However, condition can affect value, project feasibility and the amount of work required before a sale or refinance. Each lender establishes its own standards, so approval cannot be inferred from a typical leverage range. A strong request connects the collateral, proposed work, requested proceeds, project schedule and exit into a consistent transaction narrative.

Credit and income may receive more flexibility than they would in conventional bank underwriting, but that does not make them irrelevant under every lender’s process. The defining convention is that property value and exit carry the main underwriting weight. Borrowers should be prepared to explain ownership, acquisition terms, intended improvements, available cash and the event that will repay the debt. The exit should fit within a term that usually runs 6 to 24 months. A sale exit depends on completing the property plan and reaching a buyer, while a refinance exit depends on the asset becoming suitable for long term financing. The source of repayment should not rest on an undefined future event. Since lender requirements vary, borrowers should confirm what valuation, project and financial information will be required before relying on a proposed closing schedule.

Pricing reflects market benchmarks and transaction risk

Hard money carries a higher rate and higher fees than bank or agency debt because it provides speed, flexibility and short term capital for transactions that may involve condition, vacancy, credit or timing challenges. Pricing commonly includes interest and origination points charged at closing. The available market conventions do not establish a standard rate, point charge or spread, so borrowers must obtain transaction specific terms. Lenders set pricing according to their assessment of collateral, leverage, project complexity, closing speed, exit strength and other underwriting considerations. The payment structure is usually interest only, which limits scheduled principal reduction during the term and leaves the exit responsible for repaying the balance. A comparison should account for all stated charges and payment obligations, not simply the quoted interest rate. It should also distinguish costs due at closing from costs paid during the holding period.

Market benchmarks provide context, although they do not determine a private lender’s final quote. As of Oct 26, 2026, the Prime rate was 7.00%, SOFR was 3.89%, the 5 year Treasury was 4.78%, the 10 year Treasury was 4.96% and Fed funds was 3.88%. These measures represent different parts of the credit and capital markets, so they should not be treated as interchangeable loan offers. A private lender may consider funding costs and broader market conditions alongside property specific risk and execution demands. Borrowers should ask whether pricing is fixed or tied to a benchmark, how interest is calculated and which fees apply at closing or payoff. Where a requested figure is not stated in the written offer, it should be clarified directly with the lender rather than estimated from a benchmark.

The right financing depends on timing, cost and exit certainty

Hard money fits transactions where speed or flexibility has greater value than the lower cost usually associated with bank or agency debt. Common uses include closing quickly, buying distressed or vacant property and bridging to a sale or long term refinance. It can also fit a renovation strategy when financing is based on a share of purchase price plus renovation cost. The structure is less suitable when the borrower needs permanent financing from the outset, cannot identify a credible exit or expects the project to extend beyond a short term maturity. A conventional option may fit better when the property and borrower can satisfy its underwriting process and the closing schedule allows enough time. The decision is therefore not simply about approval. It is about whether temporary, higher cost capital solves a defined problem without creating an unrealistic repayment deadline.

Offer comparison should begin with usable proceeds, required cash contribution, payment structure, origination points, closing conditions and maturity. Borrowers should then test the planned exit against the time needed for renovation, stabilization, marketing, sale or refinancing. Terms usually run 6 to 24 months, so modest schedule changes can matter. Leverage should be compared on the same basis because a quote tied to current value is not directly equivalent to financing based on purchase price plus renovation cost. Borrowers should also identify which funds are available at closing and which are released later. BestCRE considers clarity especially important where a lender’s term sheet leaves valuation, draws, payoff procedures or extension treatment undefined. Final terms should be reviewed in their complete written form. This guide explains market structure and does not provide legal, tax or investment advice.

Frequently Asked Questions

Can I get a hard money loan for a vacant property?

Yes, vacant property is a common reason borrowers consider hard money financing. Private lenders can offer more flexibility on condition and occupancy because underwriting focuses mainly on property value and the proposed exit rather than borrower income. Vacancy still matters because it can influence current value, renovation needs and the feasibility of a sale or long term refinance. Lenders typically advance 60% to 75% of current value, although each lender determines its own leverage and eligibility. A borrower should explain why the property is vacant, what work or leasing activity is planned and how the loan will be repaid within the proposed term. Approval and final terms depend on the lender’s assessment of the complete transaction.

Can hard money financing cover renovation costs?

Yes, fix and flip financing may cover a share of the purchase price plus renovation cost. That does not mean every lender funds every improvement or releases all proceeds at closing. Each lender sets its own structure, conditions and disbursement process. Borrowers should distinguish the total commitment from the cash available for acquisition, closing and later work. They should also confirm how the lender evaluates current property value and how renovation funding relates to required borrower cash. Because terms usually run 6 to 24 months, the construction plan should align with the maturity and intended sale or refinance. The written offer should make clear what costs are included, when funds become accessible and what information is required before a release.

Can I repay a hard money loan with a refinance?

Yes, long term refinancing is a common exit for a hard money loan. Borrowers often use private financing to acquire, repair or stabilize a property before replacing it with debt better suited to a longer holding period. The refinance is not automatic. The property must become acceptable to the future lender, and the process must be completed before the hard money loan matures. Typical terms run 6 to 24 months, which makes scheduling important. A borrower should define what must change before refinancing, such as property condition or vacancy, without assuming that future credit will be available. The hard money lender will evaluate whether the proposed exit is credible because repayment depends primarily on the property plan and that exit.

What happens if a hard money project takes longer than expected?

A delay can put the planned exit in conflict with the loan maturity. Hard money terms usually run 6 to 24 months, so construction, marketing, sale and refinancing schedules need to fit inside a relatively short period. The market conventions do not establish a standard extension right, extension fee or default treatment. Each lender sets its own terms, and borrowers should review those provisions before closing. A realistic schedule should account for the work required and the steps needed to complete the exit. If timing changes, the borrower should consult the written loan terms and communicate with the lender. This explanation describes how the structure works and does not provide legal advice about any specific agreement.

Is a hard money loan based on personal income?

Not mainly. Hard money loans are underwritten primarily on the property’s value and the planned exit rather than the borrower’s income. That distinction can help when a transaction has strong collateral but does not fit conventional income based underwriting or must close quickly. It does not mean that every lender ignores the borrower or financial capacity. Each private lender establishes its own requirements and may request information needed to assess the transaction and execution risk. The central questions remain whether the collateral supports the requested loan and whether a sale or long term refinance can repay it within the term. Typical leverage is 60% to 75% of current value, but actual approval and proceeds depend on lender specific underwriting.

Related BestCRE loan guides

CRE lenders by state

BestCRE loan guides are editorially independent. Program terms described are typical market conventions or official program rules; each lender sets its own terms after underwriting. BestCRE is not a lender and does not make loans. Benchmark rates are informational, not quotes. See our Legal Disclaimer and Compensation Disclosure.

Hotel financing differs from conventional commercial real estate lending because the collateral is both real estate and an operating business. Room revenue changes nightly, and performance can move with occupancy, pricing, management and the strength of the flag. Lenders therefore examine revenue per available room, occupancy, franchise agreement terms and management alongside property value and sponsor financial capacity. The financing source depends on whether the borrower is an owner operator, an investor acquiring a stabilized hotel, or a developer pursuing construction or conversion. Banks, CMBS lenders, debt funds and life companies serve different portions of the market, while SBA 7(a) and SBA 504 programs can serve qualifying owner operators. The right choice begins with the business plan rather than a headline rate.

A hotel loan request should explain how the property will generate enough cash flow to cover debt service through varying demand periods. It should also identify renovation needs, including any franchisor property improvement plan. A PIP is often funded at closing or through future funding under the loan, so its scope and timing can materially affect the structure. Construction and conversion loans typically require meaningful sponsor equity and a signed franchise agreement. Stabilized properties may have access to a wider group of lenders, depending on operating history and asset quality. This BestCRE guide explains the principal programs, underwriting considerations, lender categories, pricing benchmarks and comparison points that borrowers can use when deciding which financing sources to contact.

Hotel financing combines real estate and operating business underwriting

Hotel lenders size loans from property cash flow, collateral value, sponsor strength and the durability of the operating plan. Unlike an apartment lease roll, hotel revenue resets nightly. Underwriting therefore considers occupancy, revenue per available room, flag, franchise agreement terms and management. A lender will assess whether historical performance supports the requested debt and whether projected improvements depend on reasonable operating assumptions. The borrower’s role also matters. An owner operator may qualify for SBA 7(a) or SBA 504 financing because a hotel counts as an operating business. An investor pursuing a non owner occupied property may instead approach banks, CMBS lenders, debt funds or, for a top tier asset, life companies. Each lender applies its own credit standards and determines whether the property, sponsor and transaction fit its program.

The process usually begins with a clear statement of purpose, such as acquisition, refinancing, construction, conversion or renovation. The lender then evaluates the hotel’s operating history and the capital required to execute the plan. If a franchisor requires a property improvement plan, the lender may fund the PIP at closing or include future funding that becomes available as work is completed. This structure connects loan proceeds to the renovation schedule and franchise obligations. Construction and conversion requests receive additional scrutiny because repayment depends on completing the project, opening the hotel and reaching sustainable operations. These loans typically require meaningful sponsor equity and a signed franchise agreement. Borrowers should expect the lender to reconcile the sources and uses, operating plan and franchise requirements before issuing final terms.

Hotel loan structures reflect volatile cash flow and capital needs

Hotel loans generally carry lower leverage and higher debt service coverage requirements than apartment or industrial loans because hotel cash flow is more volatile. The exact leverage, coverage threshold, amortization, maturity and recourse structure depend on the lender, property and transaction. Stabilized hotels with consistent occupancy, durable revenue per available room and established management may support more favorable structures than properties undergoing conversion or operational recovery. A loan may fund only the existing property balance, or it may also include renovation proceeds. When future funding is included, the lender will define conditions for advances, often linking availability to project progress and compliance with the approved scope. Borrowers should compare the amount available at closing with the total commitment because those figures can serve different needs.

Rate structure is another important distinction. A bank, CMBS lender, debt fund or life company may assess duration, repayment risk and capital requirements differently, producing different structures even when each lender reviews the same hotel. Owner operators evaluating SBA 7(a) or SBA 504 financing should focus on how the applicable program rules interact with ownership, occupancy and business operations. Terms described as typical are market conventions rather than promises, and each lender sets its own requirements. Borrowers should also identify whether a property improvement plan is financed within the loan, funded separately by the sponsor or reimbursed through future advances. A seemingly larger commitment may provide less usable acquisition capital if substantial proceeds are reserved for PIP work, interest or other approved costs.

Banks and nonbank lenders serve different parts of the hotel market

FDIC data as of June 30, 2026 shows 4,167 banks reporting commercial real estate loans, with $3.07 trillion of total commercial real estate loans. The FDIC also reports $1.23 trillion of investor, non owner occupied, nonfarm nonresidential loans across 3,963 banks with exposure in that category. Within the FDIC ranking, Wells Fargo Bank, N.A. had $64.8 billion in that category and $121.6 billion of total commercial real estate loans, with commercial real estate growth of +0.3%. JPMorgan Chase Bank, N.A. had $39.4 billion, $179.8 billion and +4.6%, respectively. Bank of America, N.A. had $37.1 billion, $79.9 billion and +6.1%. These figures show relevant loan book size and growth, but they do not establish hotel specialization or current credit appetite.

Other banks in the FDIC ranking include U.S. Bank, N.A. with $17.9 billion of investor, non owner occupied, nonfarm nonresidential loans and Truist Bank with $17.0 billion. Nonbank examples include middle market debt funds Axonic Capital of New York, NY, Basis Investment Group of New York, NY, Directed Capital of St. Petersburg, FL, and Orix of New York, NY. Large loan debt fund examples include CIM Group of Los Angeles, CA, MSD Partners of Chicago, IL, and TPG Real Estate Finance Trust of San Francisco, CA. These classifications identify headquarters and lender type only. They do not indicate that a named institution offers a particular hotel product or current terms. Borrowers must confirm present appetite directly and should contact lenders whose size, execution model and property focus match the transaction.

Source: FDIC Call Reports as of June 30, 2026. Banks ranked by investor cre loans held on balance sheet. Bank names link to each bank’s FDIC record. See the full Best CRE Lenders ranking.

Nonbank lenders shown alphabetically as examples of the lender types active in this category. Inclusion is not a ranking or an endorsement; confirm current programs with each lender.

Qualification depends on hotel performance, sponsorship and franchise strength

A strong hotel financing request demonstrates both historical performance and a credible forward operating plan. Lenders underwrite revenue per available room, occupancy, the flag, franchise agreement terms and management because those factors influence recurring operating income. They also evaluate whether the sponsor can support the property through renovation, demand fluctuations or operating disruption. For an acquisition or refinancing, the lender will test whether current cash flow provides sufficient debt service coverage under its own standards. Because hotels generally face higher coverage requirements and lower leverage than apartment or industrial properties, sponsor equity and liquidity can materially affect approval. Each lender sets its own documentation and credit requirements, so borrowers should present consistent property, operating and ownership information across every lender conversation.

Franchise documentation is central when the property is flagged or will become flagged. The lender needs to understand the agreement term, required standards and any conditions that could affect continued use of the brand. A franchisor property improvement plan should be incorporated into the budget and financing request rather than treated as a later expense. For construction and conversion loans, a signed franchise agreement and meaningful sponsor equity are typically required. Management also matters because projected performance depends on the operator’s ability to control costs, maintain standards and generate room demand. Borrowers can strengthen the file by clearly connecting historical results, planned capital work and management responsibilities. Unsupported operating improvements will receive more scrutiny than assumptions tied to an executable renovation and operating plan.

Hotel loan pricing begins with market benchmarks and property risk

As of Oct 26, 2026, the Prime rate was 7.00%, SOFR was 3.89%, the 5 year Treasury was 4.78%, the 10 year Treasury was 4.96%, and Fed funds was 3.88%. These benchmarks provide market context, but none is a complete hotel loan quote. A lender selects the relevant benchmark or fixed rate reference and then prices for property risk, leverage, debt service coverage, duration, sponsorship and execution complexity. A construction or conversion loan may be assessed differently from financing for a stabilized property because completion and operating risks differ. The lender’s funding model also matters, which is why banks, CMBS lenders, debt funds and life companies can produce different pricing and structures for the same asset.

Borrowers should examine the full economic package rather than comparing only the stated rate. Important variables include how much capital is available at closing, whether renovation proceeds are held for future funding, how the lender tests debt service coverage and what conditions govern advances. A property improvement plan may increase the required capital while also supporting the hotel’s franchise position and operating plan. The sponsor’s equity contribution, the reliability of historical cash flow and management quality can also influence pricing. Where the research does not establish a rate, fee or spread, the correct figure must come from a lender’s written proposal. Each lender sets its own terms, and benchmark movements can change pricing before a transaction closes.

The right financing source follows the ownership and business plan

SBA 7(a) and SBA 504 financing can fit qualifying owner operators because hotels count as operating businesses. Bank financing may fit a property with established operations and a sponsor that meets the bank’s credit standards. CMBS financing can be considered when the borrower seeks a capital markets execution for an investment property, while debt funds may be relevant when the transaction requires a different risk or execution profile. Life companies are a source for top tier assets. Construction or conversion financing fits projects with meaningful sponsor equity and a signed franchise agreement. No category is automatically best for every borrower. The appropriate source depends on property performance, ownership, renovation needs, timing and the lender’s current credit standards.

Offer comparison should begin with proceeds, required equity and the treatment of the property improvement plan. Borrowers should then compare rate structure, debt service coverage methodology, closing conditions, future funding provisions and the lender’s requirements for franchise and management arrangements. A lower stated rate may not produce the better result if proceeds are insufficient or renovation funding is unavailable. Conversely, additional flexibility may carry a different cost or require more sponsor support. Written proposals should be reviewed on consistent assumptions so that differences reflect actual lender terms rather than different operating forecasts. BestCRE treats lender selection as a matching exercise: identify the financing category that fits the business plan, then contact suitable lenders and compare complete proposals.

Frequently Asked Questions

Can I use an SBA loan to buy a hotel?

Yes, SBA 7(a) and SBA 504 financing can be available to qualifying owner operators because hotels count as operating businesses. Eligibility depends on the borrower’s ownership and operating structure as well as the applicable program rules and lender standards. An investor seeking financing for a non owner occupied hotel may need to consider banks, CMBS lenders, debt funds or life companies for a top tier asset instead. The lender will still underwrite hotel operations, including revenue per available room, occupancy, flag, franchise agreement terms and management. Borrowers should confirm program eligibility and transaction structure with the participating lender before relying on SBA financing.

Why are hotel loans harder to qualify for?

Hotel loans are harder to qualify for because operating income changes nightly and can be more volatile than income from apartment or industrial properties. Lenders therefore require lower leverage and higher debt service coverage than they generally require for those property types. They also review revenue per available room, occupancy, flag, franchise agreement terms and management. A hotel’s real estate value is important, but the lender must also judge the operating business and the sponsor’s ability to manage periods of weaker cash flow. Construction and conversion requests add completion and opening risk, so they typically require meaningful sponsor equity and a signed franchise agreement.

Can a hotel loan pay for a property improvement plan?

Yes, a hotel loan can fund a franchisor property improvement plan at closing or through future funding under the loan. The structure depends on the lender’s requirements, the renovation schedule and the approved uses of proceeds. Funding at closing may place capital into a controlled account, while future funding can make proceeds available as work progresses and required conditions are met. Borrowers should show the PIP clearly in the project budget and explain how the work supports franchise compliance and hotel operations. Each lender sets its own advance conditions, so the borrower should compare available closing proceeds, reserved renovation funds and the total commitment.

What information should I send a hotel lender?

Send a coherent package covering hotel performance, ownership, management, franchise obligations and the proposed use of loan proceeds. Lenders underwrite revenue per available room, occupancy, flag, franchise agreement terms and management, so the materials should allow those items to be evaluated consistently. If the transaction includes a property improvement plan, include its scope and explain whether the requested loan should fund it at closing or through future funding. Construction and conversion requests should establish meaningful sponsor equity and include a signed franchise agreement. The lender may request additional financial and property information under its own credit standards, particularly when projected operations differ from historical results.

Are fixed or floating rates better for hotel financing?

Neither structure is inherently better for every hotel. The choice depends on the business plan, expected holding period, cash flow stability and the borrower’s ability to absorb changing debt service. As of Oct 26, 2026, SOFR was 3.89%, the 5 year Treasury was 4.78%, and the 10 year Treasury was 4.96%. These are market benchmarks, not hotel loan quotes. Lenders add pricing based on leverage, debt service coverage, sponsorship, property performance and execution risk. Borrowers should compare the complete proposal, including proceeds and future funding, and evaluate how the rate structure interacts with the hotel’s operating income.

Related BestCRE loan guides

CRE lenders by state

BestCRE loan guides are editorially independent. Program terms described are typical market conventions or official program rules; each lender sets its own terms after underwriting. BestCRE is not a lender and does not make loans. Benchmark rates are informational, not quotes. See our Legal Disclaimer and Compensation Disclosure.

Apartment loans finance rental properties with five or more units. Properties containing one to four units generally require residential or DSCR financing instead. For qualifying multifamily properties, borrowers can pursue agency, HUD, bank or bridge debt. The right channel depends on the property’s occupancy, operating history, renovation plan and expected holding period, as well as the sponsor’s financial position. Stabilized assets often fit agency or HUD programs, while banks may provide greater flexibility for smaller properties or situations that do not meet standardized program requirements. Bridge lenders serve value add and lease up business plans that need time before permanent refinancing. This BestCRE guide compares how these structures work, what lenders examine and which questions matter when requesting proposals.

The choice should begin with the business plan, not a lender name. A long term owner may value fixed rate debt, full amortization and non recourse treatment. A borrower planning renovations, lease up or an earlier sale may instead need flexible funding and a practical exit strategy. Banks also remain important because they hold multifamily loans on their balance sheets and can evaluate circumstances outside standardized agency rules. Their structures frequently involve recourse and shorter maturities. Pricing must be considered alongside proceeds, amortization, reserves, prepayment provisions and closing conditions. Each lender sets its own terms, even when working within a broader program. This guide explains financing mechanics for comparison purposes and does not provide legal, tax or investment advice.

Apartment loan programs match capital to the property plan

Fannie Mae and Freddie Mac purchase apartment loans originated through approved lenders under Fannie Mae DUS and Freddie Mac Optigo. The approved lender originates and services the financing while applying the relevant program rules. This model is designed for apartment properties that can support permanent debt through established operating income. HUD 223(f) also provides permanent financing for existing apartments. Unlike a bank loan held on the originating institution’s balance sheet, an agency loan is sold to Fannie Mae or Freddie Mac after origination. That distinction affects how market activity is measured. FDIC bank call reports include multifamily loans retained by banks, but they do not include agency loans sold to Fannie Mae and Freddie Mac.

Banks and bridge lenders operate differently from permanent agency and HUD channels. Banks retain multifamily loans on their own books, allowing them to apply internal credit standards and consider smaller or transitional properties with greater flexibility. Bridge lenders finance apartment value add and lease up plans before the property is ready for an agency or bank refinance. The bridge structure therefore depends heavily on a credible path to stabilization and replacement financing. Borrowers should identify the intended exit before taking temporary debt, since the future refinance will depend on operating performance and the lending environment at that time. Program descriptions establish the broad structure, but individual lenders determine underwriting conditions, documentation requirements, pricing and approval decisions.

Loan structure matters as much as headline proceeds

Fannie Mae and Freddie Mac apartment loans typically allow maximum leverage of 80% loan to value and require a 1.25 debt service coverage ratio. These are typical agency maximums, not automatic proceeds for every transaction. Property income, valuation, physical condition and lender underwriting can produce lower leverage. Agency and HUD loans are generally non recourse with standard carve outs and provide the longest fixed rate terms among the principal apartment financing channels. HUD 223(f) loans for existing apartments can extend up to 35 years and are fully amortizing. That structure can reduce refinancing exposure, although the appropriate program still depends on property eligibility and the borrower’s objectives. Each lender applies its own terms within the governing program requirements.

Bank multifamily loans often carry terms of 3 to 10 years, include recourse and accommodate smaller or transitional assets that may not fit permanent programs. A shorter maturity can align with an expected sale, renovation or refinancing, but it also creates refinancing risk if conditions change. Bridge financing is intended for value add and lease up plans before an agency or bank takeout becomes available. When comparing structures, borrowers should examine amortization, recourse, required reserves, prepayment provisions, extension conditions and the definition of default. They should also test whether projected property income supports the required debt service coverage. The highest proceeds are not necessarily the most suitable result if the maturity, repayment schedule or exit requirements conflict with the operating plan.

Banks hold a substantial share of apartment debt

FDIC call reports dated June 30, 2026 show 4,167 banks reporting commercial real estate loans, with $3.07 trillion in total commercial real estate exposure. Of those institutions, 3,488 reported multifamily loans totaling $670.3 billion. JPMorgan Chase Bank, N.A. ranked first with $107.3 billion of multifamily loans and $179.8 billion of total commercial real estate loans, with commercial real estate growth of +4.6% year over year. Flagstar Bank, N.A. followed with $26.9 billion of multifamily loans, while Wells Fargo Bank, N.A. reported $26.5 billion. PNC Bank, N.A. held $15.0 billion and U.S. Bank, N.A. held $14.5 billion. These figures measure balance sheet holdings, not agency originations sold to Fannie Mae or Freddie Mac.

The remaining FDIC leaders include Columbia Bank at $10.3 billion, Santander Bank, N.A. at $9.4 billion, Valley National Bank at $9.0 billion, Truist Bank at $8.7 billion and Bank of America, N.A. at $8.5 billion of multifamily loans. Nonbank capital is another source for transitional financing. Examples of middle market debt funds include Bridge City Capital in Brooklyn, NY, Bridge Invest in Miami, FL, Electra Capital in Lake Park, FL, HPS Investment Partners in New York, NY, TerraCotta Group in El Segundo, CA, and Tremont Realty Capital in Newton, MA. The FDIC figures show retained bank portfolios only, while these nonbank examples illustrate a separate lender type. A large portfolio does not establish availability, pricing or suitability for a particular borrower.

Source: FDIC Call Reports as of June 30, 2026. Banks ranked by multifamily loans held on balance sheet. Bank names link to each bank’s FDIC record. See the full Best CRE Lenders ranking.

Nonbank lenders shown alphabetically as examples of the lender types active in this category. Inclusion is not a ranking or an endorsement; confirm current programs with each lender.

Qualification depends on durable income and a credible plan

For stabilized apartment financing, lenders focus on whether recurring property income can cover scheduled debt payments. Agency underwriting commonly uses a 1.25 debt service coverage ratio and a typical maximum of 80% loan to value, but those thresholds do not ensure approval or maximum proceeds. A lender must assess the reliability of income, property expenses, occupancy and value before establishing the supported loan. The sponsor’s financial capacity and experience can also influence the review, particularly where completion of a business plan is important. Existing apartments seeking HUD 223(f) financing must fit that program’s requirements. Because each lender sets its own terms, borrowers should expect documentation requests and credit judgments to vary even when proposals reference the same program.

Transitional underwriting places additional weight on execution. A bridge lender financing value add or lease up must determine whether the planned work can move the property toward stable operations and an agency or bank refinance. Bank underwriting may be more flexible for smaller or transitional properties, but bank loans often include recourse and shorter terms. Borrowers should present a consistent explanation of current performance, planned changes and the expected refinancing or sale. They should also reconcile operating information before approaching lenders so each proposal is based on comparable facts. When a lender offers greater proceeds than its peers, the borrower should identify which income, value or business plan assumptions account for the difference and whether those assumptions remain realistic through closing.

Market benchmarks influence pricing but do not determine it

As of Oct 26, 2026, the Prime rate was 7.00%, SOFR was 3.89%, the 5 year Treasury was 4.78%, the 10 year Treasury was 4.96% and Fed funds was 3.88%. These benchmarks provide context for apartment loan pricing, but they are not borrower interest rates. The relevant benchmark depends on the lender, loan structure and pricing date. The final rate also reflects property risk, leverage, debt service coverage, term, amortization, recourse and the lender’s required return. Because the available facts do not establish lender spreads, fees or closing costs, borrowers should request complete written proposals rather than infer a loan rate from a benchmark. Market movements can also change economics while a transaction is being underwritten.

Total borrowing cost extends beyond the stated coupon. Reserves, prepayment provisions, extension requirements, amortization and closing conditions can materially affect the economics and flexibility of a loan. Agency and HUD structures may appeal to borrowers seeking long fixed rate terms and generally non recourse treatment with standard carve outs. Bank debt may trade those features for greater flexibility on smaller or transitional properties. Bridge financing must account for the cost and timing of the future refinance, since it supports value add and lease up plans before permanent debt. Borrowers should compare proposals using the same assumptions about proceeds, closing date, repayment and exit. Each lender sets its own terms, so benchmark rates alone cannot identify the least expensive or most suitable offer.

The property strategy should determine the financing choice

Agency financing generally fits stabilized apartments whose income supports permanent debt and whose owners value long fixed rate terms with generally non recourse treatment. HUD 223(f) may fit an existing apartment property when the borrower prioritizes a fully amortizing term of up to 35 years. A bank loan may fit a smaller property, a transitional situation or a borrower seeking flexibility outside standardized permanent programs, while accepting that bank terms often run 3 to 10 years and may require recourse. Bridge debt fits value add or lease up plans that need time to reach an agency or bank refinance. Properties containing one to four units require residential or DSCR loans rather than multifamily financing.

A useful comparison places proceeds, rate structure, amortization, maturity, recourse, reserves, prepayment terms, extension conditions and closing requirements on the same basis. Borrowers should ask how the lender calculated value and cash flow, what conditions could reduce proceeds, and which events could delay closing. For bridge debt, the comparison should include the proposed route to agency or bank refinancing. For permanent debt, the owner should consider whether prepayment provisions fit the expected holding period. FDIC portfolio size can identify active bank balance sheets, but it does not establish that a named institution will approve a specific property. BestCRE treats lender selection as a matching exercise between the asset, sponsor, business plan and requested structure.

Frequently Asked Questions

Is a five unit property considered commercial real estate?

Yes. Apartment loans finance properties with five or more units, placing a five unit rental in the multifamily financing category described in this guide. Properties with one to four units generally use residential or DSCR loans instead. That dividing line affects which lenders, underwriting methods and loan programs are relevant. A borrower evaluating a property near the cutoff should confirm the legal unit count and present the property consistently to prospective lenders. The financing category does not by itself determine approval, proceeds or pricing. Each lender still evaluates property income, value, condition, borrower strength and the proposed business plan under its own credit standards.

Are apartment loans non recourse?

Some are. Agency and HUD apartment loans are generally non recourse with standard carve outs, while bank loans often include recourse. The distinction changes which assets or obligations may support repayment if the property cannot meet the debt. Borrowers should not rely on a program label alone because each lender documents its own terms, and carve outs remain important even in a generally non recourse structure. The comparison should identify the borrowing entity, any guarantor obligations and the circumstances that activate liability. Bridge financing also requires careful review of the proposed structure. Legal counsel should evaluate the final documents because this general explanation is not legal advice.

Why is an agency apartment loan missing from FDIC bank data?

An agency apartment loan can be absent because FDIC call reports count multifamily loans held on a bank’s balance sheet, while loans sold to Fannie Mae and Freddie Mac do not appear there. Fannie Mae and Freddie Mac purchase qualifying apartment loans through approved lenders under Fannie Mae DUS and Freddie Mac Optigo. As a result, a bank’s reported multifamily portfolio does not capture every apartment loan it may have originated or serviced. The FDIC figures dated June 30, 2026 are useful for comparing retained bank exposure, but they should not be treated as a complete ranking of all multifamily lending activity across agency, HUD, bank and nonbank channels.

Can a bridge apartment loan be refinanced with an agency loan?

Yes, if the property becomes eligible and supports the permanent loan at the time of refinancing. Bridge lenders finance apartment value add and lease up plans before an agency or bank refinance. The future agency lender will still underwrite the property under its applicable rules. Typical agency maximums are 80% loan to value and a 1.25 debt service coverage ratio, but actual proceeds can be lower. A borrower should therefore evaluate the bridge exit using supportable operating assumptions rather than treating the refinance as certain. The timing of stabilization, property value, income and market pricing can all affect whether replacement financing is sufficient to repay the bridge loan.

What should I prepare before calling an apartment lender?

Prepare a clear property and financing summary. It should explain whether the asset is stabilized, undergoing value add work or completing lease up, since that determines whether agency, HUD, bank or bridge financing is the more relevant starting point. The lender will need enough operating information to evaluate income, expenses, value and debt service capacity. Agency sizing commonly considers a 1.25 debt service coverage ratio and a typical maximum of 80% loan to value. Borrowers should also describe ownership objectives, the expected holding period and any planned refinance or sale. Consistent information helps lenders produce proposals that can be compared on proceeds, structure, recourse, maturity, amortization and closing conditions.

Related BestCRE loan guides

CRE lenders by state

BestCRE loan guides are editorially independent. Program terms described are typical market conventions or official program rules; each lender sets its own terms after underwriting. BestCRE is not a lender and does not make loans. Benchmark rates are informational, not quotes. See our Legal Disclaimer and Compensation Disclosure.