Financing is where most commercial deals are quietly won or lost, and it works nothing like the home mortgage you are picturing. Whether you are a business owner buying your own building or an investor buying income property, the loan you pick changes your down payment, your rate, and how much you can actually buy. This is the plain-English version I give clients, updated for 2026 rates — no jargon for its own sake.
Start with one question: will you occupy it?
Everything forks here, so answer it first. If your business will occupy at least 51% of an existing building (60% for new construction), you are owner-occupied, and that unlocks SBA financing — the cheapest, lowest-down-payment money on the menu. If you are leasing it to others, it is an investment, and you are in conventional or DSCR territory with more cash down. I have watched deals fall apart simply because someone assumed the wrong bucket.
Your five financing paths
1. SBA 504 — the owner-occupier’s best friend
Structured as 50% bank first mortgage, 40% CDC (SBA) second, 10% your down payment. The CDC piece is fixed for 25 years near the ~5.8% debenture rate, blending to roughly 6.3% on a typical 2026 deal. On a $1M building, 10% down is $100,000 plus about $15,000 in closing — versus $250,000+ conventional. If you are buying space to run your business in and want to keep cash in the business, this is usually the answer.
2. SBA 7(a) — flexible, but variable
More flexible on use — real estate, working capital, equipment in one loan — but typically variable at Prime + 2.25–2.75% (~9–9.5% in 2026). Handy for smaller or mixed-need deals; the variable rate is the price you pay for that flexibility.
3. Conventional bank loan
20–30% down, terms usually 15–20 years, priced around 6.0–7.0% in 2026. Faster and lighter on paperwork than SBA, no occupancy rule, but it wants more equity. This is the move when your balance sheet is strong or when speed matters more than squeezing the down payment.
4. CMBS / conduit
A non-recourse loan the lender securitizes after closing, starting near 6.63%. Worth it on larger stabilized investment property where non-recourse matters more than flexibility — just know the prepayment terms are rigid.
5. DSCR / bridge (for investors)
DSCR loans qualify on the property’s income rather than your tax returns, and want a coverage ratio around 1.25+. Bridge debt is short-term money to buy, reposition, or simply wait out rates before refinancing into permanent financing.
How much you actually need down
| Path | Typical down payment |
|---|---|
| SBA 504 (owner-occupied) | ~10% |
| Conventional (owner-occupied) | 20–25% |
| Conventional / DSCR (investment) | 25–35%+ |
| CMBS (stabilized) | 25–35% |
On a $1M purchase that is the difference between about $100,000 down with SBA 504 and $250,000+ conventional — usually the single biggest factor in what you can afford at all.
The number that really decides it: DSCR
Debt-service coverage ratio is net operating income divided by your annual debt payment, and lenders generally want 1.25 or better. In a high-rate market it is DSCR, not loan-to-value, that usually caps your loan, because the payment is simply bigger. Model it before you fall for a building — it saves a lot of heartbreak.
Run it yourself: the borrowing-power calculator shows your max loan from income and rate, the mortgage & amortization calculator shows the payment, and the cap-rate tool checks the return.
How to actually get financed
- Decide owner-occupied vs. investment — it sets the whole path.
- Get your numbers ready — business financials, tax returns, and a pro forma on the property.
- Model DSCR and down payment at today’s rates before you write an offer.
- Match the loan to the goal — SBA 504 to preserve cash, conventional for speed, DSCR or bridge for investment and repositioning.
- Line up the lender early — a real conversation with the right lender is what makes your offer credible.
This is educational, not financial, tax, or lending advice — rates and programs change and every deal is its own animal. I am a broker, not a lender or advisor; confirm terms with a qualified lender.
Buying or refinancing in South Florida? Send me the deal — I will help you see what pencils and connect you with the right lender in my network.
