Most adults are generally aware of what’s necessary to qualify for a home loan, but far fewer people are aware of the requirements for qualifying for a commercial real estate loan.

The three C’s of mortgage lending for commercial real estate – collateral, cash flow, and credit history – will tell you in a nutshell what’s necessary to qualify for commercial real estate loan.

Property loan collateral

Generally in a commercial real estate loan, the property itself will serve as collateral for the transaction, meaning that should you default on your payments, the lender could exercise his/her right to foreclose and assume ownership of the property. The lender will also generally require the borrower to commit the rents associated with the property to the lender, thereby acquiring additional loan security.

Property cash flow

The income which is generated by a property is one of the most important factors in obtaining a commercial real estate loan. In particular, the last 90 days worth of rental income from a property will be the most crucial element in approving a commercial real estate loans. That makes property cash flow critical for loan approval.

Credit history of the borrower

There may be multiple borrowers involved in a commercial real estate loan transaction, and if so, all of their credit histories will be closely examined before approving a loan. That means none of the borrowers can have a bankruptcy in their credit history, and there can be no foreclosures or open tax liens or judgments against any of the borrowers. In addition, it will be generally necessary to have a minimum credit score of 660 or more, for all of the prospective borrowers.

Commercial real estate lending from Elevation Financial 

If you’ve been waiting to pull off a major investment in commercial real estate, but you need funding first, we may be able to provide the assistance you need. Contact us at Elevation Financial, and we’ll be glad to explore some ways that might give you the funding needed for that big transaction you’ve been waiting for.