The Ultimate Guide to Permanent Financing in Commercial Real Estate (CRE)

May 10, 2024

When it comes to financing commercial real estate (CRE) projects, permanent financing is a crucial aspect to consider. Unlike short-term financing options, permanent financing provides long-term funding for the acquisition, development, or refinance of commercial properties. In this comprehensive guide, we will delve into the key aspects of permanent financing in CRE and how it can benefit investors and developers.

The Basics of Permanent Financing

Permanent financing, also known as long-term financing, is a type of loan that provides funding for the permanent ownership of a commercial property. Unlike interim or bridge loans, which are short-term solutions, permanent financing is designed to provide extended funding, typically for terms ranging from 5 to 30 years.

Key Features of Permanent Financing

Permanent financing offers several key features that make it an attractive option for CRE investors and developers:

  • Low Interest Rates: Permanent financing often comes with lower interest rates compared to short-term financing options, providing cost savings over the long term.
  • Stable Payments: With fixed-rate options, borrowers benefit from stable monthly payments, offering predictability and easier financial planning.
  • Long-Term Ownership: Permanent financing supports the long-term ownership and stability of commercial properties, allowing investors to focus on property management and value appreciation.

Types of Permanent Financing

There are various types of permanent financing options available in the CRE market, including:

  • Traditional Mortgages: Offered by banks and financial institutions, traditional mortgages provide long-term financing with fixed or adjustable interest rates.
  • Government-Sponsored Loans: Programs such as SBA 504 loans and USDA Business & Industry loans offer attractive terms and lower down payment requirements for eligible projects.
  • Life Insurance Company Loans: These loans are provided by life insurance companies and often come with competitive rates and extended terms.

When seeking permanent financing for a CRE project, it's essential to evaluate the specific needs of the project and explore the available options to find the most suitable solution.

The Permanent Financing Process

The process of obtaining permanent financing involves several key steps:

  1. Assessment: Evaluate the financial needs of the project, including the loan amount, terms, and repayment structure.
  2. Application: Submit a comprehensive loan application, including financial statements, property details, and project plans.
  3. Underwriting: The lender conducts a thorough review of the application, including property appraisal and financial analysis.
  4. Approval and Closing: Once the loan is approved, the parties proceed to finalize the terms and close the loan, leading to disbursement of funds.

Benefits of Permanent Financing

Permanent financing offers several benefits for CRE investors and developers:

  • Stability: Long-term funding provides stability and predictability for property ownership and cash flow management.
  • Lower Risk: Fixed-rate options help mitigate interest rate risk, offering protection against market fluctuations.
  • Flexibility: Permanent financing can be tailored to suit the specific needs of different types of commercial properties, from office buildings to industrial facilities.


In summary, permanent financing plays a critical role in the commercial real estate market, offering long-term funding solutions for investors and developers. By understanding the basics, types, and process of permanent financing, stakeholders can make informed decisions to support their CRE projects and long-term investment strategies.