Bank vs CMBS for STNL Financing Under $8M — Which Wins in 2026?
Most NNN investors default to CMBS because it is the most familiar capital source in the net lease market. For deals above $10 million, CMBS often makes sense. For deals under $8 million, the math usually points to a bank with a dedicated net lease program. Here is why.
The Problem with CMBS at Small Loan Sizes
CMBS conduits earn their margin through securitization, which means they carry significant fixed overhead costs regardless of loan size. Legal fees, rating agency costs, servicer setup, and structuring expenses are largely the same whether the loan is $2 million or $20 million. On a $20 million loan, these costs are a rounding error. On a $2 million loan, they represent a meaningful drag on pricing.
This is why CMBS lenders typically have effective minimums of $2 million to $5 million, and even within that range, pricing tends to be less competitive than what a dedicated bank program can deliver. Below $8 million, CMBS conduit pricing on NNN product routinely comes in wider than what bank programs offer, once fees are factored in.
The CMBS pricing advantage that exists on larger deals largely disappears below $5 million and often reverses below $3 million. Bank execution at CMT plus 190 to 260 basis points is frequently tighter than what CMBS can quote on small NNN loans.
How the Bank STNL Program Prices
CLS CRE has access to a national bank program built specifically for single tenant NNN lending. The program prices off the Constant Maturity Treasury (CMT), which is the same index CMBS uses, but typically with tighter spreads for smaller deals in this size range.
Current program pricing: CMT plus 190 to 260 basis points, depending on tenant credit, market, lease term, and leverage. At today's CMT rates, all-in rates are highly competitive for this product type. The spread range reflects the program's appetite for a broad range of national credit tenants, from pharmacy chains and dollar stores to quick service restaurant brands.
Side-by-Side Comparison
| Factor | Bank (Dedicated STNL Program) | CMBS Conduit |
|---|---|---|
| Rate Pricing | CMT + 190 to 260 bps. Competitive for deals under $8M | Often wider effective spread on small loans due to fixed securitization costs |
| Loan Minimum | $750,000 | Effectively $2M to $5M for competitive execution |
| Closing Timeline | 30 to 45 days typical | 60 to 90 days typical |
| Prepayment | Flexible step-downs (negotiated). No defeasance required | Defeasance or yield maintenance standard. No flexibility |
| Non-Recourse | Available selectively at 60% LTV and below | Standard non-recourse with carve-outs at most leverage levels |
| 1031 Exchange Fit | Strong. 30 to 45 day closes accommodate most 1031 timelines | Can be tight. CMBS pipelines sometimes push past 1031 deadlines |
| Underwriting Flexibility | Case-by-case decisions. Works in secondary and tertiary markets | Standardized conduit guidelines. More rigid on market tier |
| LTV Maximum | Up to 70% (75% case-by-case) | Up to 75% standard |
The Prepayment Flexibility Advantage
This is the factor most borrowers underweight when comparing execution options. CMBS loans carry defeasance or yield maintenance prepayment provisions as a standard feature. If you want to sell, refinance, or pay off the loan early, you are paying a significant penalty calculated based on the difference between your locked rate and current treasury rates. In a rising rate environment, defeasance costs can be modest. In a falling rate environment, they can be enormous.
The bank STNL program offers flexible step-down prepayment structures that can be negotiated at origination. Common structures include 2,2,1,1,1 (step-down over the loan term) or 1,1,1,1,1 for borrowers who want maximum flexibility. This means no defeasance, no yield maintenance, and a defined, predictable cost of early repayment.
For investors who actively manage their portfolios, sell assets opportunistically, or want the ability to refinance into better rates when they become available, this flexibility has real dollar value that does not show up in the headline rate comparison.
Non-Recourse: Who Wins?
CMBS is typically non-recourse with standard carve-outs at most leverage levels. The bank program offers non-recourse selectively starting at 60% LTV. For borrowers at or below 60% LTV with strong credit tenant leases, both options can deliver non-recourse financing. For borrowers who need to push to 70% or 75% LTV, CMBS may offer a cleaner non-recourse path at higher leverage.
In practice, many NNN investors prefer conservative leverage. The NNN sector attracts buyers who value predictable, passive income over maximum leverage. A borrower financing a QSR or pharmacy at 50% to 60% LTV has access to non-recourse bank financing, competitive pricing, and flexible prepayment through the bank program.
When to Choose CMBS Instead
Bank execution is not always the answer. CMBS makes more sense in the following situations:
- Loan size above $10 million. Fixed CMBS costs become less significant at larger balances, and conduit pricing gets more competitive as loan size grows.
- You need maximum leverage above 70% LTV. CMBS conduits can go to 75% LTV as a standard product on strong credit tenant NNN assets. Bank programs typically cap at 70%.
- You plan to hold through the full loan term with no likelihood of prepayment. If you have zero intent to sell or refinance before maturity, the prepayment flexibility of a bank loan has no value to you, and CMBS may price slightly better at larger sizes.
- You need the longest possible fixed term. CMBS can offer 10-year fixed terms as a standard structure. Bank programs go up to 5-year fixed, which may roll to a floating rate or require refinancing.
Eligible Tenants for the Bank STNL Program
The bank program CLS CRE accesses targets corporate-guaranteed leases from national brands with 500 or more locations, at or near investment grade credit quality. Eligible tenant categories include:
- Quick service restaurants: Taco Bell, McDonald's, Burger King, Wendy's, Chipotle, Starbucks, Subway, Chick-fil-A, Sonic, Panera Bread, Domino's, KFC, Popeyes
- Pharmacy and drug store: CVS, Walgreens, Rite Aid
- Dollar and value retail: Dollar General, Family Dollar, Dollar Tree, Five Below
- Auto parts and service: AutoZone, O'Reilly Auto Parts, Advance Auto Parts
- Convenience and fuel: 7-Eleven, Circle K, Wawa, Sheetz
- Fitness and wellness: Planet Fitness, Anytime Fitness
- Healthcare services: Aspen Dental, DaVita Dialysis, and similar chains
- Home improvement and specialty: Sherwin-Williams, Tractor Supply, and others
Bottom Line: Match the Capital to the Deal Size
The most expensive mistake in STNL financing is using the wrong capital source for the deal size. CMBS is a powerful tool for larger NNN deals and portfolios. For the majority of individual NNN property acquisitions and refinances, which fall in the $750,000 to $8 million range, a dedicated bank STNL program delivers better pricing, faster execution, and more flexibility.
CLS CRE has direct access to this program and can run a side-by-side comparison for your specific deal. If you are evaluating STNL financing, submit your deal details and we will tell you which execution makes the most sense. We respond within 24 hours.
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