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Just like with a residential mortgage, obtaining a loan for a commercial property requires that you meet certain minimum financial requirements. Some of the most common qualifications for a commercial mortgage include good business or personal credit, an adequate loan-to-value ratio and sufficient borrower income.

Credit

Commercial lenders will use your credit score to judge how trustworthy you will be as a borrower, how likely you are to repay their loan. The minimum credit score that each lender accepts varies but in general they will expect a FICO score of at least 680. The higher your score the easier it will be to get a loan as long as the other requirements are met.

Loan-to-Value Ratio

Much of a commercial loan’s underwriting is determined by the value of the property and the borrower down payment. There is no standard ratio, but lenders typically look for loan-to-value ratios around 75 percent. That means making a down payment of around 25 percent of the appraised value of the property. The exact amount can be negotiated with your mortgage lender.

Income

Lenders also want to see that your business has the income to support the purchase. They will want to see that your net operating income is greater than your business debts by at least 25 percent. This is called the debt service coverage ratio. Commercial lenders may also want to examine your business’ liquid assets as a way to help secure the loan.

Every lender has their own specific list of requirements, but if you have these three categories covered you should be well on your way to qualifying for a commercial mortgage loan.


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