How Much Down Payment Do You Need for a Commercial Real Estate Loan?

For most investors and business owners, the down payment is the first real hurdle in a commercial real estate deal. It determines how much capital you need on hand, how large a property you can pursue, and which loan programs are open to you. The number depends on the loan type, the property, and your own financial profile.

SBA, Fannie Mae, Freddie Mac and federal supervisory figures come from the program rules and term sheets listed under Sources. Rows marked market-typical have no single published standard; they describe common ranges as of October 2026, and individual capital providers may require more or less equity after underwriting.

Figures current as of October 2026. Sources checked October 28, 2026. How we research and verify our insights.

Commercial down payments are meaningfully higher than those common in owner-occupied residential financing, and the gap reflects how lenders view risk on income-producing property. For a fuller comparison, see our guide on how commercial and residential loans differ. The sections below explain each loan type, the factors that push the number up or down, and the strategies investors use to reduce the cash they bring to closing.

Down Payment by Loan Type in 2026

The single biggest determinant of your down payment is which financing program you use. Each loan type carries its own loan-to-value (LTV) limits and coverage tests, and your down payment is the gap between the purchase price (or total project cost) and the loan amount.

SBA 504 Loans — As Low as 10%

For owner-occupied commercial property, the SBA 504 program offers one of the lowest down payment requirements available. Its three-party structure combines a bank first mortgage, a Certified Development Company second mortgage, and borrower equity. Under 13 CFR 120.910, the borrower contributes at least 10% of project cost. The minimum rises to 15% if the business has operated for two years or less or the project is a limited or single-purpose building, and to 20% if both apply. The business must occupy at least 51% of an existing building, or 60% of new construction, under 13 CFR 120.131. The CDC portion carries a long-term fixed rate.

SBA 7(a) Loans — Often 10% to 20%

The SBA 7(a) program is more flexible in how funds are used. SBA's SOP 50 10 sets a minimum equity injection of 10% of project costs for start-ups (businesses in operation one year or less) and for changes of ownership. For an initial business acquisition that 10% cannot be waived; for expansions and owner buyouts the lender may reduce it when the business has enough liquidity. For an existing business buying its own building, the lender sets the equity requirement, and a market-typical range is 10% to 20%. Stronger credit, collateral, and cash flow push the requirement toward the lower end. Like the 504, it is limited to owner-occupied real estate (the same 51% occupancy rule applies), and real estate terms run up to 25 years.

Conventional Bank Loans — 20% to 35%

Conventional commercial mortgages from banks and credit unions typically require 20% to 35% down, with 25% a common benchmark. Federal interagency guidelines cap bank loans on improved property at 85% LTV, and banks are expected to set lower internal limits for riskier property types, so most land between 65% and 80%. A cash-out component, a weaker property, or higher requested leverage can prompt the lender to ask for more equity. Deposit relationships and strong financials can work in your favor.

Agency Multifamily Loans (Fannie Mae / Freddie Mac) — From 20%

For apartment properties of five or more units, Fannie Mae and Freddie Mac conventional loans allow a maximum LTV of 80% with a minimum 1.25x debt service coverage ratio, which translates to at least 20% down on a qualifying, stabilized property. The loan is sized to whichever test is more restrictive, and Freddie Mac's Conventional Small grid lowers the maximum to 65% to 75% for full-term interest-only loans and terms under seven years. These programs are generally non-recourse, and underwriting requires strong, stable cash flow.

CMBS (Conduit) Loans — 25% to 35%

CMBS loans generally land in the 65% to 75% LTV range, implying a 25% to 35% down payment. As one data point, the Benchmark 2026-V22 conduit pool filed with the SEC in May 2026 showed a weighted average cut-off LTV of 61.3%, with individual loans from 49.8% to 79.2%. CMBS suits stabilized properties with predictable income and borrowers who can accept a rigid structure in exchange for non-recourse, fixed-rate debt.

Bridge and Transitional Loans — Varies Widely

Bridge loans are sized against the property's current and projected value and the business plan rather than a simple purchase-price LTV. Equity requirements vary widely with the project's risk, but investors should generally expect to contribute 20% to 35% or more, particularly for value-add or unstabilized assets.

DSCR Investor Loans — 20% to 30%

For investors financing income property without traditional income documentation, DSCR loans typically require 20% to 30% down; there is no agency or regulatory standard, so the range is market-typical and stronger cash flow and credit can improve terms. The property's debt service coverage, more than your personal income, drives both approval and leverage. You can estimate yours with our DSCR calculator.

Construction Loans — 25% to 40% of Cost

Construction loans are sized on total project cost. Federal supervisory guidelines cap bank construction loans at 80% LTV for commercial and multifamily projects, 75% for land development and 65% for raw land, and most lenders lend well inside those limits on a loan-to-cost basis. Sponsors should plan on equity of roughly 25% to 40% of total cost, a market-typical range that depends on pre-leasing, sponsor experience and the market. See our construction loan requirements guide for detail.

Owner-Occupied vs. Investment Property

One of the most important distinctions is whether you will occupy the property. Lenders view owner-occupied commercial real estate as lower risk, because the business has a direct stake in the property's success. That is why owner-occupied SBA programs allow down payments as low as 10%, while purely passive investment properties generally require 20% or more. If your business will occupy a majority of the space, you may have access to far more favorable leverage than an investor buying the same building to lease out.

What Moves Your Down Payment Up or Down

Even within a single loan type, several factors influence where your specific number lands:

• Credit and financial strength. Higher credit scores, lower existing debt, and strong liquidity can reduce required equity; weaker profiles increase it.
• Property cash flow (DSCR). A property with robust income relative to its debt gives the lender more comfort, sometimes supporting higher leverage and a lower down payment.
• Property type and condition. Stabilized, in-demand assets command better leverage than special-use, transitional, or higher-volatility properties.
• Market strength. Properties in strong, liquid markets typically support higher LTVs than those in thin or declining ones.
• Recourse. Accepting a personal guarantee (a recourse loan) can sometimes unlock higher leverage; non-recourse financing often comes with more conservative LTVs.
• Loan size and structure. Cash-out components, lower requested rates, and certain structures can all prompt lenders to require additional equity.

LTV vs. LTC: Two Ways Lenders Size Equity

For acquisitions, lenders generally think in terms of loan-to-value (LTV), the loan as a percentage of the property's appraised value. For construction and value-add projects, they often use loan-to-cost (LTC), the loan as a percentage of total project cost, including purchase, renovation, and soft costs. Your equity contribution is the remainder under whichever measure applies. Understanding which metric a lender is using helps you anticipate how much cash a project will actually require.

Strategies to Reduce Your Cash Out of Pocket

If the required equity exceeds what you have available, several strategies can reduce the cash you bring to closing:

• Use owner-occupied SBA financing. If you qualify, SBA 504 or 7(a) financing can reduce upfront equity to 10% to 20% for properties your business will occupy.
• Negotiate seller financing. A motivated seller may finance part of the purchase price, reducing the cash you need at closing, often in exchange for higher rates or a balloon.
• Bring in preferred equity or mezzanine debt. These capital layers can fill the gap between your senior loan and the equity you have available, reducing the common equity you must contribute. (See our guide to preferred equity vs. mezzanine debt.)
• Partner with joint-venture equity. Bringing in an equity partner lets you pursue larger deals than your own capital would allow, in exchange for sharing the upside.
• Recycle equity from existing assets. A cash-out refinance on a property you already own can fund the down payment on your next acquisition.

Each of these approaches changes the economics and control of a deal, so the right choice depends on your goals, your cost of capital, and your tolerance for sharing returns.

Planning Your Down Payment

Before you pursue a commercial property, model your likely down payment across the loan types your deal might qualify for, and stress-test it against the factors above. Knowing whether you are looking at 10%, 25%, or 35%, and knowing the strategies that can lower that figure, lets you size your search realistically and approach capital providers with a clear plan. Plan the equity before you commit to a property.

Frequently Asked Questions

This article is provided for educational and informational purposes only and does not constitute financial, legal, tax, or investment advice, or a commitment to lend or to arrange financing. Brookmont Capital Ventures, LLC provides capital markets advisory services and Brookmont Lending, LLC provides commercial and business-purpose lending. Brookmont's capacity varies by transaction and is disclosed in the transaction documents. All financing is subject to approval and underwriting. Market figures change; confirm current data before relying on them.