Small Balance CRE Financing in 2025: Structure, Growth, and Market Shifts
By Kegan Sharp, Vice President
In the evolving landscape of commercial real estate (CRE), small balance financing has emerged as a vital segment for both borrowers and lenders. It plays a critical role in serving business owners, investors, and developers seeking efficient capital solutions when traditional lenders pull back.
What Is Small Balance CRE Financing?
Typically loans under $5 million often used to finance:
- Multifamily properties ranging from 5 to 50 units
- Retail assets, including multi-tenant and STNL properties
- Small-footprint or low-leveraged commercial buildings
- Owner-occupied facilities such as medical offices, warehouses, and industrial properties
Typical features include:
- Loan-to-value ratios of 60%-75% for investment properties and up to 90% for owner-users
- Fixed and floating rate options
- Flexible underwriting, particularly from non-bank and private lenders
Key Trends Shaping the Market
- Owner-Occupied Demand: Small business owners continue to invest in their own facilities, driving demand for stable, long-term financing. In fact, owner-occupied properties now account for 58% of small balance CRE transactions.
- Shift Toward Non-Bank Lenders
Regional banks face regulatory pressure and liquidity constraints, especially in office and retail. This opens the door for alternative lenders offering faster, more flexible solutions. - Focus on Resilient Sectors
Multifamily, hospitality, and owner-occupied assets are outperforming. Office remains segmented, with lenders favoring stabilized or repositioned properties.
Key Players in the Small Balance CRE Lending Space
A diverse group of lenders actively serve the small balance CRE market, each bringing unique strengths depending on deal type, borrower profile, and speed of execution:
- Banks and Credit Unions
Still a go-to for stabilized properties and owner-user financing. While they have moved increasingly toward relationship-based lending, some banks still pursue well-structured transactional deals.
- Life Insurance Companies
Though commonly linked to institutional loans, life insurance companies are more active in the small balance space than many realize. Some life company partners will consider loans as low as $1 million, often with attractive terms and long-term fixed options.
- Non-Bank and Private Lenders
Playing a bigger role as traditional credit pulls back. These lenders offer speed, flexible underwriting, and are comfortable with transitional properties or unique borrower profiles.
- SBA Lenders
SBA 504 and 7(a) programs remain a popular choice for owner-occupied properties, offering low down payments and long-term fixed rates.
- Debt Funds
Ranging from opportunistic bridge lenders to those offering longer-term fixed or structured solutions. Debt funds often excel when deals require speed, leverage, or non-traditional terms.
Final Thoughts
Small balance CRE financing is no longer a backwater of the lending world; it’s a dynamic, fast-evolving space where flexibility, creativity, and speed are key. The ability to match each borrower and asset with the appropriate lender is what drives successful execution.
We’re closing loans throughout the country, helping clients access the capital they need to grow. If you’re navigating the current market and need a financing partner who moves with purpose and precision, we’d be glad to help.