What to Know Before Applying for a Commercial Real Estate Loan

What to Know Before Applying for a Commercial Real Estate Loan

Securing commercial real estate property is often a major step for an entrepreneur or small business owner, and will generally need to be financed by a commercial real estate loan. When you apply for such a loan, there are certain factors that will be evaluated more heavily by a potential lender, and if you know what these are, you can prepare yourself ahead of time to position yourself for approval. Here’s what you need to know before applying for commercial real estate financing.

What Lenders Look For

There are certain aspects of your application that will be reviewed more closely by a commercial real estate lender. First of all, your business finances will be scrutinized in a very detailed manner. If you own a small business, you’ll have to demonstrate that you have positive cash flow all year round, because that’s what will be necessary to repay the loan. One of the specific calculations that a lender might perform using your business data is your debt service coverage ratio.

Another area which will come under close scrutiny will be your business credit score. This will have a huge impact on your interest rate, payback period, and any down payment which is required. Generally speaking, the lowest required FICO Small Business Scoring Service (SPSS) credit score which would qualify for approval is 155.

This is in fact, the minimum score considered acceptable by the SBA when it is reviewing commercial real estate loan applications. Another area which will be reviewed closely by a commercial real estate lender would be your personal finances. Even if your business is extremely healthy and shows solid cash flow, it will be necessary to have your personal finances in good order as well, in order to secure approval from a potential lender.

Ready to Apply for a Commercial Real Estate Loan?

At Drawbridge Capital, we often provide commercial real estate financing to qualified candidates. Contact us today to see if you qualify for funding that will help you secure that next commercial real estate transaction.