How to get a CMBS loan

To get a CMBS loan, size the deal against loan-to-value, coverage and debt yield, collect term sheets from several conduit lenders, sign an application with a deposit that funds the third-party reports, pass underwriting and credit committee, lock the rate, negotiate the loan documents, and close. Expect more paperwork and legal cost than a bank loan.

Step 1: Confirm CMBS is the right loan

CMBS works for a stabilized income property, held by an investor, where the owner wants fixed-rate, non-recourse debt and expects to hold to maturity. It is the wrong tool for owner-occupied buildings (SBA territory under 13 CFR 120.131), construction or lease-up, and very small loans. If you are unsure, read what a CMBS loan is and the pros and cons first.

Step 2: Size the loan yourself

Lenders offer the smallest of three limits: loan-to-value against the appraisal, debt service coverage against net cash flow, and debt yield against net operating income. Run your numbers through the CMBS loan calculator using a lender-style NOI: market vacancy, a management fee even if you self-manage, and replacement reserves. Compare the result to what recent loans of your property type got on the requirements page. If the answer is short of your existing balance, read CMBS refinance before you go further.

Step 3: Package the deal

A lender quotes faster, and more accurately, from a complete package. The core items:

• Trailing 12-month operating statement and the two prior years
• Current rent roll, and leases for commercial tenants
• Purchase contract (acquisitions) or current loan statement and loan documents (refinances)
• Sponsor financial statement, schedule of real estate owned, and a short biography of the sponsor’s experience
• Ownership chart for the borrowing entity and guarantor
• Capital expenditures completed and planned

The full list, including what comes later in diligence, is on the CMBS loan checklist.

Step 4: Get term sheets from several lenders

Conduit lenders differ on property types, markets, leverage and how they write their documents. Ask several for a term sheet (also called a quote or application letter). Compare more than the rate:

Compare	Why it matters
Proceeds and the test that sets them	The highest rate may come with the most proceeds
Interest-only period	Changes cash flow and the balloon
Upfront and ongoing reserves	Cash you cannot use; caps and springing reserves are negotiable
Cash management triggers	Where a cash sweep starts and how it ends
Prepayment	Defeasance or yield maintenance, the length of the open period
Carve-out guaranty	Which acts make the loan full recourse
Deposits and fees	Application deposit, what is refundable, origination fee

The loan offer comparison tool lines two term sheets up on cost and proceeds. An advisor can run this step for you; see CMBS loan broker.

Step 5: Sign the application and fund the deposit

Once you pick a lender, you sign its application and pay a deposit. The deposit pays for the third-party reports and often part of lender counsel; how much is refundable if the loan does not close is in the application, so read it. Lenders describe the application as the start of their process: Bank of America says a mortgage application or term sheet is completed by the borrower with supporting documentation from a checklist (BANK5 2025-5YR14 prospectus, p. 292).

Step 6: Third-party reports and the site visit

The lender orders, and you pay for:

• Appraisal by an MAI-designated or state-certified appraiser
• Phase I environmental site assessment to ASTM standards (a Phase II only if the consultant recommends it)
• Property condition assessment by licensed engineers, which sets the immediate repair reserve
• Seismic report in seismic zones 3 and 4, and zoning evidence

The lender, or its agent, also inspects the property and the market. Each requirement above is described in the lenders’ own underwriting standards in the BANK5 2025-5YR14 prospectus, pp. 293 to 298.

Step 7: Underwriting and credit committee

The lender rebuilds your cash flow with its own assumptions, reviews leases against the rent roll, and runs background, credit, lien, judgment, bankruptcy and litigation searches on the sponsor and guarantor. Then the loan goes to credit committee, which, in Bank of America’s description, “may approve the mortgage loan as recommended, request additional due diligence, modify the terms or reject the mortgage loan entirely” (prospectus, p. 294). Committee is where a term sheet most often changes. Ask the lender up front what could move proceeds after the reports come in.

Step 8: Lock the rate

A CMBS rate is a benchmark plus a spread. The lender hedges once you lock, so the lock usually needs a deposit and a commitment from you to close. Ask when the lock is available, what it costs, and how the deposit is treated if the deal dies. Current spreads and rates: CMBS loan rates.

Step 9: Negotiate the loan documents

The lender’s counsel drafts the closing documents; your counsel negotiates them. The main ones:

• Loan agreement and promissory note
• Mortgage or deed of trust, and assignment of leases and rents
• Guaranty of recourse obligations (the carve-out guaranty) and environmental indemnity
• Cash management agreement and deposit account control agreement, if there is a lockbox
• Organizational documents for the single-purpose entity and, on larger loans, a non-consolidation opinion

Your side delivers title insurance, an ALTA survey, insurance certificates meeting the loan’s insurance requirements, and estoppel certificates and SNDAs from major tenants. Late estoppels are a classic cause of a slipped closing; request them early.

Step 10: Close, fund reserves, meet your servicer

At closing the loan funds, upfront reserves are deposited, and the lender’s closing costs come out of proceeds. Within weeks you get a welcome letter from the servicer, which is who you deal with from then on. Months later the loan is sold into a trust. Read the guides to living with the loan before you need them: servicer consent, cash management, prepayment penalties and assumption.

Where CMBS deals fall apart

• The appraisal comes in low and proceeds drop.
• The property condition report finds immediate repairs that become a large reserve.
• The Phase I finds a recognized environmental condition and a Phase II is needed.
• Tenants do not return estoppels, or an estoppel contradicts the rent roll.
• A background search turns up litigation or a prior default the sponsor did not disclose.
• Rates move before the lock and coverage no longer works.

Each is easier to handle when found early, which is the case for packaging the deal well in step 3. Costs at each stage are covered in CMBS loan closing costs.