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Commercial Real Estate Loan Criteria

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Loan Criteria:

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Loan Size - $200,000 – $150,000,000.

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Locations –  All Markets in USA.

 

Term –  2 to 30 year fixed

 

Amortization  – 10-30 year, partial or full-term interest only available.

 

Origination Fees  – 0.5% to 2%.

 

Interest Rates – Treasury / SOFR Rates + margin.

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1. Property Type

Lenders assess the type of commercial property being financed, such as:

  • Office buildings

  • Retail spaces

  • Industrial warehouses

  • Multifamily housing (5+ units)

  • Hotels

  • Special-use properties (e.g., self-storage, medical facilities)

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2. Loan-to-Value (LTV) Ratio

  • Typically, 65%–80% of the property's appraised value.

  • Lower LTVs are favored as they reduce lender risk.

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3. Debt Service Coverage Ratio (DSCR)

  • Measures the property's net operating income (NOI) against the annual debt payments.

  • Typical DSCR: 1.20 to 1.50.

    • Example: If annual debt payments are $100,000, the NOI must be at least $120,000 for a DSCR of 1.2.

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4. Creditworthiness of the Borrower

  • Personal and business credit scores.

  • Strong credit profiles can lead to better terms.

  • Guarantor requirements for larger loans.

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5. Borrower’s Experience

  • Lenders favor borrowers with prior experience in managing similar properties or ventures.

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6. Down Payment

  • Down payment ranges from 20%–35%.

  • Some SBA loans or other special programs may allow smaller down payments.

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7. Property Location

  • Properties in prime locations are less risky and more attractive to lenders.

  • Market demand and vacancy rates in the area are also considered.

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8. Financial Statements

  • Borrower-provided documents such as:

    • Two to three years of tax returns (personal and business).

    • Recent bank statements.

    • Profit and loss statements.

    • Balance sheets.

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9. Appraisal

  • A professional valuation is required to determine the property’s market value.

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10. Lease Agreements (if applicable)

  • If the property generates rental income, lenders require a copy of the lease agreements to assess stability and cash flow.

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11. Loan Purpose

  • Clear documentation on how the loan proceeds will be used (e.g., purchase, refinance, renovations).

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12. Interest Rates and Loan Terms

  • Rates depend on:

    • Loan type (fixed or variable).

    • Borrower risk profile.

    • Loan term (typically 5–25 years).

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13. Collateral

  • The property itself usually serves as collateral.

  • Additional guarantees or cross-collateralization might be required.

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Do you want more details on a specific type of CRE loan, like SBA 504 or bridge loans? Call us. 

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