Commercial mortgage lenders are not interchangeable. A bank, a private lender, and a broker will look at the same property and produce materially different terms, because they fund differently, hold differently, and have different appetites for asset type and sponsor experience. Knowing which type you are speaking to changes what their answers mean.
Types of commercial mortgage lender
| Lender type | Strengths | Trade-offs |
|---|---|---|
| Banks and credit unions | Lowest pricing; relationship banking | Slowest; narrowest asset appetite; heavy documentation; often requires deposits |
| Private and non-bank lenders | Speed, flexibility, broader asset types, entity vesting | Higher pricing; shorter terms |
| Debt funds | Bridge and transitional assets; larger deals | Higher pricing; institutional minimums |
| Correspondents | Access to institutional capital with local service | Placement depends on the source's box |
| Brokers | Shop many lenders; useful for unusual scenarios | Compensation layer; execution depends on placement |
For most investor-scale commercial deals the practical choice is between a bank and a private lender. Banks price better; private lenders close deals banks decline and close them faster.
What actually varies between lenders
- Asset appetite. Multifamily and industrial are widely funded. Hospitality, special-purpose, and rural assets are not.
- Minimum and maximum loan size. A floor rules out smaller deals entirely; a ceiling caps larger ones.
- Leverage. Maximum LTV varies meaningfully, and the difference determines your equity requirement.
- Coverage requirement. The minimum debt service coverage ratio the property must clear.
- Recourse posture. Some require full personal guarantees; others offer non-recourse with carve-outs.
- Prepayment protection. Step-down, yield maintenance, or defeasance — very different costs if you exit early.
- Sponsor experience requirements. Some lenders will not fund a first-time commercial borrower on a given asset class.
- Third-party report policy. Who orders, who pays, and whether existing reports are accepted.
The question that surfaces most of it at once: "On this specific property, at this purchase price and this income, what leverage and what rate — and is it recourse?" A quote given before those are known is an advertised starting point, not a quote on your deal.
Questions to ask before you apply
- Do you lend on this asset type in this market?
- What is your maximum LTV and minimum coverage ratio on a deal like this?
- Is this recourse or non-recourse, and what are the carve-outs?
- What is the term, and what is the amortisation period?
- What is the prepayment structure, and what does buying it down cost?
- What are the total closing costs including third-party reports?
- Who orders the appraisal and environmental, and how long do they take?
- What is realistic to clear-to-close on a file like this?
- Are you the lender, or placing this with someone else?
Recourse, guarantees, and carve-outs
Recourse determines what happens if the property does not perform. On a full-recourse loan the lender can pursue you personally for any shortfall. On a non-recourse loan they are generally limited to the property — except where a carve-out applies.
Carve-outs, sometimes called bad-boy provisions, convert a non-recourse loan to recourse for specific acts: fraud, misapplication of rents, unauthorised transfers, waste, or filing bankruptcy in bad faith. Read them. A non-recourse loan with broad carve-outs is meaningfully less protective than one with narrow ones.
Warning signs
- A rate quoted before the property is known. Commercial pricing is deal-specific by nature.
- Vagueness on recourse. This is a defined term. A lender who will not state it plainly is a problem.
- Upfront fees before a term sheet. Third-party report deposits after a signed term sheet are normal; large fees before one are not.
- No clarity on prepayment. Defeasance and yield maintenance can be far more expensive than a step-down. Ask which applies.
- Terms that move after you are committed. Legitimate changes follow new information from an appraisal or inspection. A change with no new information is a signal.
Choosing for your deal
| Your situation | Likely best fit |
|---|---|
| Stabilised, well-leased asset; time available | Bank or credit union |
| Transitional asset needing lease-up or repositioning | Private lender or debt fund |
| Speed is the deciding factor | Private lender |
| Unusual asset type or borrower profile | Broker, to shop the scenario |
| First commercial deal, straightforward property | Private lender familiar with newer sponsors |
Program parameters vary by lender and property type and change with market conditions. Figures here describe what is typical across the commercial and business-purpose market — they are not a quote. Send us the scenario for real numbers.
