Financing Commercial Real Estate in Santa Fe

Navigating financing for commercial property is very different from residential real estate. Whether you’re buying, developing, or refinancing, understanding your options and obligations is key to making sound decisions. Here’s what you need to know:

Common Financing Options

1. Traditional Commercial Loans

Offered by banks and credit unions, these loans typically require:

• 20%–30% down payment

• Fixed or variable interest rates

• Terms from 5 to 20 years

• Amortization schedules up to 25 years

Lenders often base loan terms on the income-producing potential of the property, not just borrower creditworthiness.

2. SBA 504 & 7(a) Loans

Ideal for owner-occupied properties and small business acquisitions. Key differences:

• SBA 504: Used for fixed assets (land, buildings, equipment). Often structured with 10% down, 50% bank loan, and 40% SBA-backed debenture.

• SBA 7(a): More flexible, often used for business purchases or working capital alongside real estate.

3. Bridge Loans

Short-term financing (6–36 months) often used to secure a property quickly or fund renovations before refinancing with a permanent loan. Higher interest rates, but quicker approvals.

4. Private or Hard Money Loans

Financed by private investors or funds, these loans offer flexible terms with less scrutiny, often based on asset value. Useful for time-sensitive deals or properties needing repositioning.

5. Seller Financing

Occasionally an option in Santa Fe, where the seller acts as the lender. Terms are negotiable and can help overcome strict bank requirements.

6. CMBS (Commercial Mortgage-Backed Securities)

Available for larger deals, typically $2M+. These loans are packaged and sold to investors. Long-term, fixed-rate options—but rigid underwriting and servicing.

Financing Considerations

Loan-to-Value (LTV) Ratios

Lenders generally lend 65%–80% of the property’s value. You’ll need to provide the remaining as a down payment.

Debt Service Coverage Ratio (DSCR)

A key metric that measures property income vs. debt obligations. Most lenders require a DSCR of 1.25 or higher.

Credit & Financials

While commercial lending relies more on the asset, lenders still review borrower credit, business history, tax returns, and cash reserves.

Property Type & Use

Lending terms vary based on whether the property is owner-occupied, investment-grade, or mixed-use. Specialized properties (e.g., hospitality, self-storage) may require niche lenders.

Local Lending Partners

We work with a network of Santa Fe-based and New Mexico regional lenders who understand the local market and can offer competitive terms tailored to your project.

Financing Strategies

1. Pre-Approval Before Shopping

Especially in competitive segments like downtown retail or mixed-use buildings, being pre-approved gives you leverage and credibility.

2. Leverage SBA for Owner-Users

If you’re buying a building to house your own business (office, studio, shop), SBA loans can offer favorable down payment and interest terms.

3. Value-Add Projects

Looking at properties with upside potential (through renovations or lease-ups)? Consider short-term financing with a plan to refinance into permanent debt post-improvement.

4. Use 1031 Exchange Timing

If you’re reinvesting sale proceeds via a 1031 exchange, work with lenders who understand timing pressures and can fund accordingly.

5. Build a Lending Team

Work with a commercial mortgage broker, CPA, and local real estate attorney to structure deals that align with both your financials and your long-term goals.

Need Help with Financing?

We maintain relationships with lenders, underwriters, and SBA contacts across Santa Fe and New Mexico. Whether you’re a first-time buyer or experienced investor, we’ll connect you with the right funding partner and help you build a financing strategy that supports your vision.

→ Contact us to set up a financing consultation.

Talk to a Commercial Expert

Whether you're looking to expand your portfolio or secure a strategic lease, we offer insight-driven support backed by decades of Santa Fe market experience. Reach out now to take the next step.

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