How Much Down Payment Is Needed for a Commercial Loan?

Down payment is usually the first question buyers ask when they start thinking about commercial real estate, and the answer depends on the loan type, the property, and the borrower. Most Salt Lake City commercial deals fall into a few standard down payment ranges, and knowing where a specific deal fits helps buyers plan capital and pick the right property.

Conventional commercial loans for investment property typically require 25 to 30 percent down. On a $2 million Wasatch Front industrial building, that means $500,000 to $600,000 in cash at closing, before accounting for closing costs, reserves, and working capital. Local Utah banks and credit unions compete in this space and occasionally stretch to 20 percent down for especially strong borrowers with long banking relationships, but 25 percent is the practical floor for most first time commercial investors.

SBA 504 loans change the math significantly for owner users. The 50/40/10 structure means a conventional first mortgage covers 50 percent, a certified development company covers 40 percent at a fixed rate for up to 25 years, and the buyer only puts 10 percent down. On that same $2 million building, an SBA 504 loan drops the down payment to $200,000. The tradeoff is the borrower must occupy more than 51 percent of the building, which limits the structure to owner user scenarios. For small businesses buying their operating location in Salt Lake City, SBA 504 is often the best structure because it preserves working capital for the business itself.

SBA 7(a) loans can cover up to 90 percent LTV in some cases, meaning 10 percent down, but usually come with variable rates tied to Prime. They work for smaller owner user deals or when the project includes financing items beyond real estate, such as equipment or working capital.

Bridge loans usually require 20 to 30 percent down as well, sometimes more when the property has significant vacancy or deferred maintenance. Rates run two to five points above conventional, and terms are short, typically 12 to 36 months. Bridge loans work for value add plays where the buyer plans to stabilize the property and refinance into permanent debt within a few years.

Construction loans for new development typically require 25 to 35 percent of total project cost as borrower equity, which includes land value plus cash. Developers often bring land into the deal as part of their equity contribution, which reduces the cash required at closing. Construction lending in Salt Lake City has been selective since 2022, with lenders focused on experienced sponsors and clear demand support.

Beyond the down payment, buyers should plan for closing costs of 2 to 4 percent of purchase price, capital reserves of 3 to 6 months of operating expenses, and any immediate capital work the property needs. A $2 million acquisition with 25 percent down can easily require $650,000 to $725,000 in total cash at closing once closing costs and reserves are included. Buyers who plan only for the down payment run out of cash fast. Omada Commercial, known as best commercial agents in Salt Lake City, builds complete capital plans for clients before offers go out, so the real cash requirement is clear from the start rather than a surprise at closing.