What Is a Commercial Real Estate Loan?
A commercial real estate (CRE) loan finances property used for business purposes — offices, retail centers, industrial and warehouse space, multifamily buildings (typically 5+ units), and mixed-use developments. Unlike a home loan, which is underwritten mainly on your personal income, a commercial loan leans heavily on the property's income and value. A well-performing property can carry a deal even when the borrower's personal profile is modest.
Arizona's commercial market is active across the Phoenix metro's growth corridors — from industrial in the West Valley and Chandler's tech corridor to retail and multifamily throughout Maricopa and Pima counties. Whether you're an owner-operator buying your own building or an investor adding to a portfolio, understanding the loan landscape is the first step.
Loan Types Available in Arizona
SBA 504 & 7(a) Loans
Backed by the U.S. Small Business Administration, these are the go-to for owner-occupied commercial property (you must occupy at least 51%). The 504 program is structured for real estate and equipment with low down payments; the 7(a) is more flexible general-purpose financing. Both offer attractive terms for qualifying small businesses.
Conventional Commercial Mortgages
Standard bank or portfolio financing for both owner-occupied and investment properties. Typically 20%–30% down, with terms often structured as 5, 7, or 10 years with a balloon or a longer amortization schedule.
DSCR Loans
Qualify on the property's Debt Service Coverage Ratio — whether its income covers its debt — rather than your personal income. Ideal for investors. This overlaps with our non-QM loan programs, which cover DSCR and other alternative-documentation options in depth.
Bridge & Hard Money
Short-term financing to acquire, reposition, or stabilize a property before permanent financing. Faster and more flexible, at higher cost — see our Arizona hard money guide for when the speed is worth the premium.
Construction Loans
For ground-up commercial development or major redevelopment. Structured with draws like residential construction financing — our construction loan guide explains the draw-and-inspection mechanics that apply here too.
Property Types That Qualify
Arizona lenders finance a wide range of commercial property, each with its own underwriting nuances:
- Office — single-tenant, multi-tenant, medical office
- Retail — strip centers, standalone stores, mixed-use ground floors
- Industrial — warehouse, distribution, flex, light manufacturing (strong in the West Valley)
- Multifamily (5+ units) — apartment buildings and complexes
- Mixed-use — combined residential and commercial
- Special purpose — self-storage, hospitality, automotive, and similar
Investors weighing residential versus commercial multifamily should also review our multi-family vs. single-family investment guide.
Down Payment Requirements
| Loan type | Typical down payment | Notes |
|---|---|---|
| SBA 504 / 7(a) | As low as 10% | Owner-occupied only (51%+ occupancy) |
| Conventional (owner-occupied) | 20%–25% | Depends on property & borrower strength |
| Conventional (investment) | 25%–30% | Higher for riskier property types |
| DSCR / investment | 25%–30% | Qualifies on property cash flow |
| Bridge / hard money | Varies (often 20%–35%) | Based on as-is or after-repair value |
Rates, Terms & Costs
Commercial rates run higher than residential and vary widely by loan type, term, property, and borrower. Key structural differences to expect:
- Shorter terms: many commercial loans run 5, 7, or 10 years — often with a balloon payment or a reset — even when amortized over a longer schedule (20–25 years)
- Fixed or adjustable: both are common; the choice affects your rate and risk
- Additional costs: appraisal, environmental review (Phase I), title, and origination fees are typical and larger than on a home loan
Because pricing depends so heavily on the specific deal, commercial rates are quoted per scenario. Model your numbers early with the tools at todduzzell.com/mortgage-calculator.
How to Qualify
Commercial underwriting weighs the property as much as the borrower. Lenders typically evaluate:
- Property income & value — rent roll, operating statements, appraisal, and DSCR
- Your financials — credit, net worth, liquidity, and reserves
- Experience — track record with similar properties (especially for investors)
- Down payment / equity — more equity strengthens the deal
- Business plan or exit strategy — especially for bridge and construction loans
Commercial vs. Residential Loans
| Feature | Commercial Loan | Residential Loan |
|---|---|---|
| Primary underwriting basis | Property income & value | Borrower's personal income |
| Down payment | 10%–30% | 0%–20% |
| Term | Often 5–10 yrs (balloon common) | 15–30 yrs fixed |
| Rates | Generally higher | Generally lower |
| Process | Longer, more documentation | More standardized |
| Prepayment | Penalties common | Usually none |
Pros & Cons of Commercial Financing
✓ Advantages
- Build equity and control your business's location (owner-occupied)
- Qualify on property cash flow via DSCR — less reliance on personal income
- SBA options with down payments as low as 10%
- Potential tax advantages and income from tenants
- Access to multiple structures for different strategies
✗ Disadvantages
- Higher rates and larger down payments than residential
- Shorter terms and balloon payments create refinance risk
- More documentation and longer closings
- Prepayment penalties are common
- Additional costs (environmental, appraisal) are larger
Frequently Asked Questions
What types of commercial real estate loans are available in Arizona?
SBA 504 and 7(a) (owner-occupied), conventional commercial mortgages, bridge loans, DSCR loans that qualify on property cash flow, and construction loans for ground-up projects. The right fit depends on occupancy, timeline, and how you document income.
How much down payment do I need?
Typically 10%–30%. SBA can go as low as 10% for owner-occupied property; conventional usually 20%–30%; DSCR/investment often 25%–30%. It depends on property type, your financials, and the lender.
What are commercial loan rates?
Generally higher than residential and highly deal-dependent. Terms are often shorter (5/7/10 years) with a balloon or longer amortization, fixed or adjustable. Rates are quoted per scenario rather than published.
What is a DSCR loan?
A loan that qualifies based on whether the property's income covers its debt payments rather than your personal income. Popular with Arizona investors buying rental and multi-tenant commercial property.
How do I qualify?
Lenders weigh the property's income and value, your credit and financial strength, experience, down payment, and often a business plan or rent roll. A strong-cash-flow property can carry a deal even with modest personal qualifications.
Related Arizona Loan Resources
About the Author
Todd Uzzell is a licensed Arizona mortgage lender (NMLS #1525192) with Starboard Financial (NMLS #156931), based in Gilbert, AZ. Todd helps Arizona business owners and investors finance commercial property across the state. Call or text 480-330-1724 or visit todduzzell.com.
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