Loan Vehicles Explanation

Permanent Loans

Permanent loans are the backbone of commercial real estate finance. Once a property is stabilized—with strong occupancy and reliable income—these loans step in to provide long-term stability. Terms typically range from 5 to 30 years, with fixed or floating rates in the 5–8% range depending on credit, asset class, and market conditions. Loan-to-Value (LTV) usually falls between 60% and 80%, and repayment may be fully amortizing or have a balloon at maturity. For owners, this is the stage where the project stops being about construction or lease-up and starts being about wealth preservation and predictable cash flow.

Bridge Loans

Every project hits a transitional period—a lease-up, a repositioning, a refinance window—and that’s where bridge loans shine. These short-term instruments (generally 6 to 36 months, often with extension options) provide flexibility and speed. They’re usually interest-only, with rates from 8% to 12% depending on leverage and risk, and LTV up to 75–80%. Bridge loans are perfect when timing matters more than long-term pricing, giving sponsors breathing room to execute their plan before locking in permanent debt.

Mezzanine Financing

Between the senior loan and the sponsor’s equity sits mezzanine financing—debt with equity-like risk but cheaper than bringing in new partners. It typically pushes leverage up to 80–90% of cost or value and carries rates from 10–15%. Security often comes in the form of a pledge of ownership interests rather than the property itself. Mezzanine financing is the quiet force that can elevate returns and reduce equity requirements without giving up control of the project.

Preferred Equity

Preferred equity behaves like a hybrid between debt and equity. Investors receive a fixed preferred return (often 8–15%+) before common equity distributions, and sometimes hold step-in rights if performance falters. There’s no set LTV since it’s equity, but it typically fills the gap after senior and mezzanine financing are maxed out. For sponsors, preferred equity provides flexible capital to finish a stack without diluting ownership as much as true common equity.

SBA Loans

For owner-occupied properties, the government-backed SBA 504 or 7(a) programs can be transformative. These loans offer up to 90% financing, with fixed or variable rates often below traditional bank terms (roughly 5–7%) and maturities of 10–25 years. They’re designed for operating businesses buying or refinancing their own premises—not passive investors—but for the right borrower, they’re a high-leverage, low-rate solution.

Agency Financing (Fannie Mae / Freddie Mac / HUD)

CMBS Loans

Commercial Mortgage-Backed Securities (CMBS) loans package property debt into securities sold to investors. In exchange, borrowers get fixed-rate, nonrecourse financing, usually with 5–10 year terms and rates in the 5–7% range. LTVs typically 65–75%. The trade-off is flexibility—prepayment often requires defeasance or yield maintenance—but for a stable property, CMBS can lock in long-term capital at attractive pricing.

Hard Money Loans

When speed or unconventional circumstances matter more than pricing, hard money lenders step in. These private or non-institutional loans close fast—sometimes in days—with terms of 6–24 months and rates 10–15%+. LTV typically capped at 60–70% to mitigate risk. They’re ideal for distressed properties, unconventional deals, or credit-challenged borrowers who need a temporary bridge until more traditional financing is available.

Lines of Credit / Revolving Facilities

For owners managing multiple assets or needing ongoing liquidity, a revolving line of credit acts like a corporate credit card secured by real estate. Borrowers can draw and repay as needed for acquisitions, tenant improvements, or capital expenditures. Rates vary (prime plus a margin), LTVs often 50–65%, and facilities can last several years with periodic renewals. This flexibility lets investors move quickly without arranging new debt for each need.

What does all of this mean?

Each of these loan vehicles is a tool in the capital toolbox. A developer might start with a construction loan, roll into a bridge facility, add mezzanine financing, and lock in a permanent loan once stabilized. Knowing how and when to use each option isn’t just a financing decision—it’s a strategy that can mean the difference between a stalled project and a successful one.

At Trinity Capital, we specialize in blending these tools into seamless capital stacks—matching the right structure, leverage, and terms to each stage of your project—so your vision moves from concept to completion with certainty.