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A number of bigger financial institutions use commercial finance to make money. Even given the relatively poor home market, this remains a quality investment. Commercial real estate loans may not have slightly lower returns, but the investment is more solid. That is particularly important for businesses sitting on more liquid assets than they are comfortable with.

In order to understand the business of commercial real estate loans, it's important to note the differences between commercial financing and residential financing. Residential loans focus on single family or perhaps 2 to 4 unit housing. Commercial loans can include anything from an office building to a high-rise condominium complex. Residential loans are usually limited to several hundred thousand dollars, while commercial real estate loans can reach millions or even billions of dollars.

Although a bank or investment company may be putting more money into an investment, commercial lending is seen as a safe investment. The criteria for loans are very stringent, with borrowing companies required to provide sufficient collateral and accountant verified assets and income statements. This allows the lender to make a informed decision on a borrower's credit worthiness.

Commercial lending also gives you the added benefit of a bigger selection of opportunities and products. The real estate market is largely cyclical in nature, but commercial markets are more stable. Even at low points in the economy, commercial projects continue to spring forth. More commercial business is needed, regardless of what the housing market is currently doing. This is what makes commercial real estate loans advantageous for banks and lending institutions.

Small banks and financial institutions cannot compete on a level playing field with large capital banks, simply because of the large amounts of money needed to finance commercial products. This phenomenon makes the commercial market much less competitive than the residential market. Large banks increase their bottom line by being in the forefront of commercial, which benefits stockholders.

Like any investment, capital loss is always a risk. A project might become damaged or a business might default on payment once the project has been completed. But with enough insurance and a careful audit of financial records, the big banks and lending firms can profit from commercial real estate loans. This is a boon for the lending institution by expanding business and growing the economy as a whole.