Qualify for Commercial Real Estate Financing
How nice would it be to get some real guidance on commercial real estate financing? To learn what lenders want BEFORE you even applied?
Would it be better than the traditional message of “Apply Now, and we’ll get back to you later?”
Here we’ll give you that real guidance. What you’re about to learn is the basics of how lenders actually underwrite your file.
Empowered with this knowledge, you’ll be able to “get yourself together” so to speak. You’ll be prepared to walk into the office of your commercial lender of choice.
Here’s…
Your Questions
How can I qualify for commercial real estate financing from a bank or traditional lender?
Are there lenders with less strict requirements on commercial real estate financing?
What’s the difference between commercial real estate mortgages and residential?
Real answers
How can I qualify for commercial real estate financing from a bank or traditional lender?
Here’s what banks and traditional lenders want to see…
- Be able to provide all requested documents
- Personal credit score of at least 650 to 680
- 6 to 12 months worth of payments available in the bank (reserves)
- Minimum loan amount of $100,000
- Down Payments of 10-30%
- Debt Service Coverage Ratio of 1.25 or better
You’ll also notice that we use ranges. It’s because each individual lender is a bit different from the next.
Must be able to provide all requested documents
Banks will request all of your financial documents. For more information on what they ask for when underwriting a commercial business loan and why they ask for it, click here.
Be sure to review your file before you ever submit it to a lender.
You may even want to review it with your business loan broker or commercial loan office. They can give you some insight into how you measure up to lender requirements.
Personal credit score of at least 650 to 680.
Commercial real estate financing comes with the scrutiny of your personal credit with a fine tooth comb.
If your business credit is established you can worry a bit less about the personal credit as long as you don’t have any bankruptcies or foreclosures.
No bankruptcies or foreclosures within the past 5 years to 10 years are allowed.
If your FICO credit score is less than 650, or you have a history of bankruptcy or foreclosure, you can still get a hard money commercial loan.
6 to 12 months worth of payments available in the bank (reserves)
Banks want to see that you’ll have a significant amount of money bank once the loan is closed.
They don’t want you to be wiped clean financially by the deal. It would only increase your likelihood of default which is the last thing they want.
This requirement may be less important for a cash out refinance because the cash you’ll receive from the refinance might cover it.
Minimum loan amount of $100,000
On very small loan amounts, lenders don’t stand to make much money.
As a result most don’t lend under $100,000 and still others don’t lend under $1,000,000
So you’ll need to find out what the lender’s minimum loan amount requirements are.
Down Payments of 10-30%
The hefty down payment makes lenders feel comfortable that you have enough “skin in the game.”
They figure you’ll to be highly motivated to avoid default on the loan.
They know you don't want to risk potentially losing all of your down payment money.
Debt Service Coverage Ratio (DSCR) of 1.25 or better
The DSCR is a calculation based on the income being produced by the property and/or business.
A DSCR of 1.0 means that the property will only break even leaving no profits for you, the owner.
A DSCR of 0.99 or less means you’ll be operating at a loss. You’ll actually have to find other ways to pay the loan because the property can’t stand on its own.
Lenders and banks feel comfortable with a DSCR of 1.25 or higher.
So how do they calculate DSCR?
We explain how to do the math on a commercial secured loan just as lenders do right here.
Feel free to check it out. To do the calculations, you'll need
- a calculator
- your income an expense statement on your commercial property and
- our commercial loan calculator
Are there lenders who have less strict requirements on commercial real estate financing?
Yes!
The good news is that there are a few good lenders out there who are willing to be more flexible and make the deal work.
At Guide-to-Business-Loans.com, we're experienced at getting you to the right lender for your needs.
Feel free to contact us any time at (800) 778-5361 to learn about the more flexible and agreeable lenders and banks.
Be sure to leave a message requesting our Free Pre-Application Consultation Program.
In the meantime, click the link below to listen in to our recorded BONUS message that will…
Tell you more about stated income and hard money commercial mortgages, how they work and when they’re appropriate.
The link below will answer this question...What’s the difference between commercial real estate mortgages and residential?
Feel free to click here for the real answer.
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(630) 755-6979
If you would like to learn...
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- Loosing $1,500 or more in non-refundable fees
- And without the increasing chance of rejection
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