If you already own commercial real estate — such as a storefront, warehouse, factory, or office building — then you’re sitting on a built-in, often underused source of financing.
The equity in your property doesn’t need to stay locked up.
By using it as collateral, you can secure a commercial equity line of credit or CELOC and turn that idle value into working capital.
What is a commercial real estate equity line of credit?
A CELOC loan is essentially a HELOC on commercial property. It works like a revolving credit facility tied directly to your property.
You can draw funds when you need them, repay, and then draw again if you need to cover business expenses, expand operations, or take advantage of new opportunities.
This equity loan on commercial property lets you tap into the ownership stake you’ve built in your office, retail, or industrial space.
Instead of borrowing a lump sum upfront, CELOC lenders grant you a line of credit that functions much like a credit card but on a much larger scale.
You only pay interest on the money you use, and you can access the funds multiple times throughout the term.
Because your collateral is your commercial real estate, your credit limit is typically much higher than what you could access through a personal loan or even a HELOC.
This is why many business owners use a commercial real estate line of credit to unlock large sums of capital without refinancing or selling their property.
Compared to a commercial equity loan that pays out in one lump sum, a CELOC gives you ongoing access to funds, which is especially useful if your financing needs change over time.
How does a CELOC work?
- A commercial equity line of credit lender appraises your property to determine its current value.
- They subtract your outstanding mortgage balance to calculate your net equity.
- Based on that equity, the lender sets your credit limit—usually up to 70–75% of the property’s appraised value, including existing debt and the CELOC itself.
- Once your line of credit is approved, you can start drawing funds immediately.
Those funds become available again as you repay.
You only pay interest on what you borrow, which keeps costs under control if you don’t need the full amount right away.
Terms for these commercial collateral loans generally run 5 to 10 years.
Example of a CELOC
If the distressed sale value* of your commercial property is $5,000,000 and you still owe $3,500,000 on the mortgage, you would have $1,500,000 in net equity.
A lender that extends credit at 80% of that equity could approve a line of up to $1,200,000.
*Distressed sale value reflects what the property might sell for quickly at auction, which is usually lower than open-market pricing, and the percentage of equity available depends on factors like the type of property, your risk profile, and lender requirements.
Keep in mind that when you take out a CELOC loan your property is at risk — if you default, the lender can seize it and sell it to recover their funds.
Why use a commercial real estate equity line of credit?
A CELOC lets you put your equity to work—funding renovations, covering payroll, buying equipment, or expanding into new markets.
Unlike a fixed loan, you control how much you borrow and when. And because you only pay interest on drawn amounts, you can manage costs while keeping capital available for the future.
Types of property lenders accept as collateral for a commercial equity line of credit
Private commercial real estate lenders will back a commercial property equity line of credit with almost any income-producing CRE that holds equity — office buildings, shopping centers, industrial facilities, warehouses, multifamily housing etc.
Some lenders will also accept raw land (though this usually comes with stricter terms).
The deciding factor is usable equity. Like we illustrated in the example, if your property is worth $5 million but carries a $3.5 million mortgage, you have $1.5 million in equity.
A lender may allow you to draw 70–80% of that, provided the building is in sound condition and not facing major deferred maintenance.
You won’t qualify without enough equity (or if the property is distressed).
Advantages and disadvantages of a commercial property line of credit
A CELOC can smooth cash flow or fund the growth of your business, but you need to understand the risks and costs before you sign.
The great thing about a CELOC is that it gives you working capital without forcing you to refinance or sell.
You can pull money, pay it back, and draw again.
This can be very useful if your cash needs arrive at intervals (say, periodic construction draws or phased capital improvements) because a CELOC lets you borrow only when those costs arise.
You only pay interest on what you use, so leaving most of the line untouched doesn’t cost you anything.
And because the loan is secured by your property, lenders are often more willing to approve it and CELOC rates tend to fall below what you’d pay on unsecured credit.
Many CELOCs remain open as long as your collateral is in place, sparing you from having to constantly reapply for a loan and giving you a reliable source of backup cash.
You also decide when to access the money, and you can apply that money across almost any business need, from payroll to expansion to paying down higher-cost debt.
Of course, the risk is direct: your building secures the debt, so the lender can foreclose if you fail to repay.
Commercial HELOC rates tend to be variable, which means that your monthly payments can rise if the market changes.
And while it’s cheaper than unsecured debt, a CELOC often carries higher rates than a conventional bank loan.
You’ll also need to pay for added costs (such as appraisal, origination, and annual fees).
How do I qualify for a commercial equity line of credit?
Lenders each set their own standards and commercial equity line of credit rates.
That said, most of them expect at least a year of operating history and a personal FICO score of 600 or higher.
You also need to show solid annual revenue.
In many cases, strong equity in your property can outweigh weaknesses in those areas.
The collateral is what matters most. If your building has significant value, a lender may still approve a CELOC loan application even if your business is relatively young with a modest revenue, or even if your personal credit score is low.
CELOC vs. bridge loan
Both CELOCs and bridge loans release cash that’s tied up in your property, but they’re structured for different needs.
A bridge loan delivers a lump sum upfront, usually at higher rates, with terms between 6 and 18 months.
You start paying interest immediately, regardless of how much of the capital you put to work.
They are suitable if you want to acquire a property quickly or cover costs while waiting on permanent financing. You can also use them to execute a short-term development plan.
The right choice comes down to timing and purpose. A CELOC works best if you want recurring access to capital and if you want to match your borrowing to your schedule.
A bridge loan is better when you need a large injection of funds right away and have a defined exit strategy in place.
Talk to Private Capital Investors
Are you looking to tap into your CRE equity?
Private Capital Investors provides short-term loans secured by commercial real estate nationwide. We work directly with clients as both private lenders and long-term advisors.
Contact Private Capital Investors today and put your property’s equity to work. Fill up our loan request form or call 972-865-6206.
