Commercial real estate lenders are institutions or private entities that provide capital for purchasing, refinancing, or developing commercial properties. These properties include office buildings, retail spaces, warehouses, and other income-generating assets that fall under the umbrella of commercial real estate. In most cases, commercial real estate loans are secured by the property itself, which acts as collateral.

There are two main types of commercial real estate lenders: cash flow lenders and equity lenders. Cash flow lenders — such as traditional banks, credit unions, and large financial institutions — prioritize the property’s income-generating ability. They assess whether the commercial property can support its debts obligations through rental income or other revenue before evaluating its overall value.

Equity lenders, on the other hand, are typically private lenders, hard money lenders, or other non-bank institutions. These lenders often focus on the property’s potential value, or “highest and best use,” rather than just its current income. They may offer commercial property loans to borrowers who don’t meet strict bank criteria or who need higher loan-to-value (LTV) ratios. While equity lenders are more flexible, they still consider key factors like the borrower’s creditworthiness, property cash flow, and the asset’s appraised value.