What Percent Down Do You Need for a Commercial Loan?

If you’re looking at commercial real estate, brace yourself—the down payment is usually a lot bigger than for buying a house. Most lenders want you to put down at least 20% to 30% of the property price, and sometimes more. There isn’t some magic one-size number, because different banks, lenders, and loan programs all come with their own rules. But, you won’t find zero down deals here like you might for your first home.

This matters because commercial properties—think offices, warehouses, retail spaces—are seen as riskier than a typical house. If you don’t have enough money upfront, lenders start sweating. The more you shell out in cash, the more skin you have in the game, and the better your odds of getting approved.

Here’s the kicker: the type of loan and your own finances can make a big difference in what percent you’ll need down. A solid credit score, proof of business income, and the actual property itself can either help you lower the down payment or make the lender demand more. It pays to know your numbers ahead of time, so you don’t get blindsided once you’re deep into the process.

• What’s the Typical Down Payment for Commercial Loans?
• Why Lenders Want a Higher Down Payment
• Down Payment Requirements by Loan Type
• Tips to Lower Your Down Payment
• Common Mistakes and Smart Strategies

What’s the Typical Down Payment for Commercial Loans?

The short answer: most folks need to pony up between 20% and 30% of the property price for a commercial loan. If you’re buying a $1 million building, that’s $200,000 to $300,000 out of your pocket up front. Want a deal with less? You’ll have to jump through hoops, and honestly, you might end up paying more over time just to scrape by with a lower down.

Lenders get picky with commercial loan down payment requirements because commercial properties—like office buildings, warehouses, and retail strips—are risky for banks. If businesses go under, properties can take longer to sell or rent out again. That’s why they want to see you’ve got solid skin in the game.

To put that into perspective, here’s what one commercial lender says about their standards:

"We rarely see approvals for anything less than 25% down unless the business and property are both very strong. A lower down payment usually means higher rates and more paperwork." — Bank of America Commercial Lending Officer, May 2024

Some loan programs—like certain SBA loans—can go as low as 10% down. But, there are usually strings attached. You might need the business to occupy most of the property. There’s paperwork and extra fees. Conventional loans, on the other hand, are stricter, and small local banks sometimes want even more than 30% down to keep things low-risk on their books.

If you see ads for “10% down, no problem!”—read the fine print. Those deals almost always require spotless financials and a business with proven cash flow, or they tack on higher costs elsewhere. The loan type, your credit score, your business’s numbers, even the location of the property—all these things can move the down payment requirements up or down.

Why Lenders Want a Higher Down Payment

Lenders aren’t just trying to make things tough—they’re playing defense. In the world of commercial loan down payment, banks and private lenders have seen enough businesses fold and property values drop to make them extra cautious. Down payments are their safety net. If things go sideways and you can’t pay, the lender wants to know they can sell the property and not lose money.

Commercial properties are riskier than homes for a few reasons. Tenants in office buildings or retail spots come and go, sometimes leaving properties empty for months. Plus, business income can swing up and down, and a struggling business can leave a landlord in trouble. That’s why lenders ask for a big chunk of change upfront—they want to see you’re invested and less likely to bail if things get tough.

Here’s how a higher down payment protects the lender and shapes your loan terms:

• Reduces lender risk: Your money proves you have skin in the game. If you’re risking more, you’re more likely to stick it out and keep the building running.
• Lowers loan-to-value ratio (LTV): A lower LTV means lenders are lending less compared to the property’s value, which makes them feel safe.
• Leads to better loan terms: Bigger down payments can unlock better interest rates and even higher approval odds. If you try to scrape by with a small down payment, expect higher interest or stricter loan terms.

Check out this quick rundown of how different down payment levels shake out for lenders:

If there’s one thing to take away, it’s this: the more you put down, the more comfortable your lender feels—and the more options you get. Sometimes, it’s worth waiting and saving a little longer upfront to save thousands on interest later.

Down Payment Requirements by Loan Type

Not all commercial loans play by the same rules. Your required down payment changes depending on which loan program you pick and who’s lending the money. Here’s what you really need to know about the main types of commercial loan down payment options out there.

Here’s the deal—if your business is established, has a good cash flow, and you have decent credit, you’re more likely to get away with a lower down payment. SBA loans are usually the go-to move for smaller businesses or first-timers because they keep your required cash a bit lower. But they take longer to process, and you’ll need your paperwork ultra-organized.

If you walk into a bank asking for a standard commercial loan, be ready to cough up at least 20%. And if the property is considered risky, or if your finances have a few dings, the bank may want even more. For flips, fast funding, or tricky situations, hard money lenders fill the gap—but with that much cash upfront, it’s not for everyone.

Pro tip: Some lenders let you use investor funds or a chunk of seller financing to help cover your down payment, especially on larger deals. Always ask what’s allowed, since every lender has their own box to tick off.

Tips to Lower Your Down Payment

Getting your down payment as low as possible for a commercial loan down payment isn’t about finding shortcuts—it’s all about using smart moves and knowing the options. Lenders want to see you’ve got skin in the game, but there are real ways to cut the amount you need to bring to the table.

First up: government-backed loans. The SBA 504 and SBA 7(a) programs often require less cash upfront than most conventional lenders. For example, with an SBA 504 loan, you can sometimes get away with putting just 10% down, especially if you’ve owned your business for two years or more. That’s a big step down from the 25-30% you’ll see almost everywhere else.

Here’s what you can do to get your number down:

• Add extra collateral: If you offer more collateral (like other property or equipment), lenders may let you slide with less cash upfront.
• Partner up or bring in investors: Splitting the deal means splitting the down payment too, and bringing in more creditworthy partners can give lenders confidence.
• Negotiate with the seller: Sometimes sellers are willing to finance a chunk of the payment themselves—this is called seller carryback, and it’s more common with small businesses.
• Improve your finances: Boost your business’s income, lower your debts, and get your credit score as high as possible. Strong financials lower a lender’s risk, which could mean a smaller down payment.

One last tip: ask about local or regional incentives. Certain cities and states have grant programs, matching funds, or incentives to encourage business growth. These can help with the upfront costs and lower what you put down from your own pocket.

Common Mistakes and Smart Strategies

Getting a commercial loan down payment wrong can cost you a fortune, either by missing out on a deal or shelling out more than you need to. Let’s spell out the common blunders and what actually works.

First, a lot of folks don’t shop around. They hit up one lender and assume that’s the only deal in town. Big mistake. Some lenders require 30% down, but others might go as low as 20% if your numbers look good. Always compare a few offers before making any moves.

Another tripwire? Underestimating closing costs and other upfront fees. These can easily add another 2% to 5% on top of the down payment. Not having this extra cash ready can throw a wrench in your purchase at the worst time.

Skipping the homework on business and personal credit scores is another classic mess-up. If your score isn’t at least 660 (and ideally above 700 for best rates), some lenders won’t even look at your file. Check your credit report, pay down existing debts, and clean up errors before you apply.

Here’s a common pitfall: overestimating what you can borrow. Banks look at the property’s projected income, not just your optimism. If the numbers don’t add up, they’ll slash the loan size or bump up your down payment.

Some borrowers also go in without a business plan, hoping the property’s value will speak for itself. Lenders want to see you’ve got a plan for keeping tenants and cash flowing—otherwise, you’re risking rejection or steep terms.

Here’s a table showing typical add-on costs and how they eat into your budget:

So, what does work? The smartest borrowers get their documents stacked months in advance. This usually means recent tax returns, profit-and-loss statements, and a list of your assets and debts. Show lenders you know your numbers, and they’re more likely to cut you a break on the down payment.

If your down payment’s looking thin, here are some proven ways to boost it without taking on risky loans:

• Team up with a partner who can pitch in cash.
• Tap into 401(k) or IRA funds (just remember, there can be tax hits).
• Look for down payment assistance programs—these aren’t just for first-time home buyers.
• Negotiate with the seller for credits toward closing costs.

Finally, keep your personal and business finances separate to avoid confusion for lenders—it’s a simple move that saves a lot of headaches.