Bank or credit union for a commercial real estate loan

Why the size of the lender matters more than the type

A credit union’s commercial capacity is tied to its net worth in two ways. First, the one-borrower rule: Commercial loans to one borrower are capped at the greater of 15% of net worth or $100,000 (plus 10% if fully secured by marketable collateral)³. Second, the whole member business book is capped: Net member business loans capped at the lesser of 1.75 times actual net worth or 1.75 times the minimum net worth required by the Federal Credit Union Act⁴. Some credit unions are outside that cap: Low-income designated, CDFI, business-chartered and pre-1998 business-lending credit unions are exempt from the MBL cap⁴.

A bank faces a softer constraint. Regulators watch banks against a concentration screen: Total CRE at 300% or more of total capital, with 50% or more growth over 36 months⁵. The 100% and 300% thresholds are supervisory screens, not caps on CRE lending⁵. In practice a bank near the screen slows down, raises its price or asks for deposits, while a credit union at its one-borrower limit simply cannot hold the loan alone.

Worked deal: a $1.4 million mixed-use refinance

Illustration. A building with six apartments over two storefronts produces $160,000 of NOI. The owner wants $1,400,000.

Can each lender hold it? Take two credit unions. One has $9,000,000 of net worth: 15% of that is $1,350,000, so it cannot hold a $1,400,000 loan alone and would have to sell a participation to another lender. Another has $40,000,000 of net worth: its limit is $6,000,000, and the loan fits easily. A community bank with an ordinary capital base holds the loan without a second thought. Participations work, but they add a second credit review and time.

How do the offers compare? Assume the bank offers 6.75% fixed for 5 years on a 25-year schedule with a 3-2-1 step-down, and asks for the operating accounts. The larger credit union offers 6.60% fixed for 5 years on a 20-year schedule with no prepayment penalty and does not require a full guarantee.

Five-year view (illustration)	Bank	Credit union
Annual payment	about $116,100	about $126,200
Coverage on $160,000 NOI	about 1.38x	about 1.27x
Balance after 2 years	about $1,353,900	about $1,327,800
Cost to pay off in year 2	2% step-down, about $27,100	none
Balance at the 5-year maturity	about $1,272,100	about $1,200,100
Guarantee	full	limited, with documented mitigants

The lower rate did not produce the lower payment: the credit union’s shorter schedule costs about $10,100 more a year and drops coverage toward a level some lenders would not accept. It also pays the loan down faster and leaves the owner free to sell without a penalty. If the owner might sell within three years, the credit union is cheaper. If the owner needs every dollar of cash flow, the bank’s longer schedule wins.

Where each one wins

The bank wins when:

• The loan is large relative to local credit unions’ net worth.
• You need more than a mortgage: a construction loan, a line of credit for the operating business, treasury services.
• You are building a portfolio and want one lender that can grow with you.
• The property or the borrower is outside a credit union’s field of membership.

The credit union wins when:

• The loan is small and the credit union has room under its limits.
• Prepayment flexibility matters. Many credit unions use a short step-down or none.
• A full personal guarantee is the sticking point.
• Local banks are near their concentration screens and turning down investor property.

The costs people miss

• Membership and deposits. Joining is usually easy, but the credit union may expect deposits, just as a bank does. Price the yield you give up on that cash.
• Amortization set by policy. Credit union boards set LTV and amortization by collateral type. A board policy that limits mixed-use to a short schedule can cost more than any rate difference.
• Participation delays. A loan near the one-borrower limit needs a participating lender. Ask on the first call whether the loan fits on the credit union’s own books.
• Bank covenants. Banks often add a global coverage test across everything the guarantor owns and a requirement to send annual returns. Miss them and the bank can reprice.
• Renewal risk on both. Most loans from both lenders balloon well before the schedule ends. A lender that pulls back from commercial real estate will not renew on the old terms.

Who is lending

Banks are easing. The Federal Reserve’s July 2026 survey: Net 11.3% of banks eased standards on commercial property loans⁶. Credit unions are a smaller but real source. NCUA data: 1,596 credit unions hold real-estate-secured commercial loans². Their books include $88 billion in credit union non-owner-occupied commercial property loans² and $48 billion in credit union multifamily loans².

Want quotes from both kinds of lender on the same building? Send the rent roll and the last two years of operating statements.