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How to Get a Commercial Loan, Part 2

April 6, 2014

The Quality of the Cash Flow:

  • Make sure that the net operating income of the property or business will meet the lender's minimum debt coverage ratio (DCR). Most commercial lenders require a 1.25 to 1.35 DCR. Find out ahead of time what is required.
  • Commercial lenders like it when the business or investment property has 2 years or more of stable income. If there is only 1 year or less of stability, don’t wait for the lender to discover this, point a finger at it yourself and tell the lender how you will be improving this – like with new long-term tenants moving in, remodeling, etc. Otherwise, you might need a more expensive bridge loan.

The Quality of the Property:

  • Most conventional commercial lenders will want the property to be in good condition. Older properties (20 years old or more) will always have some deferred maintenance. Be sure to include a list of items that need repair or replacement and an estimate cost in your loan submission. This will make you look like you really know what you are doing.  If there are any safety issues, be sure to point a finger at these with a cost to cure.
  • Make sure that the lender is okay with the neighborhood and the location of your commercial property. You don’t want to waste your time or the lender's time applying for a loan when demographics never would have worked for the lender. Find this out at the beginning.
  • If this is a multi-tenant property, make sure that the lender is okay with the quality of the tenants. Are they mostly mom-and-pop businesses? Are they credit-rated national chains? If you think about it, the funds for the loan are really coming from the tenants. Are they stable? Also do you have enough time left on the leases? Often if there is only a year or less left on a lease, the lender will take the income from that tenant off the rent roll. If many of the leases are running out, be sure to address this with the lender.

At Apartment Loan Store and Business Loan Store, we are diligent with the three pre-qualifications and have a 97% success rate of closing our loans as proposed since 1997 because of this process. To find out more about this process, or to apply for a commercial loan with us, please visit or Also there is a great webinar posted to the site on “How to get a commercial loan during these tough economic times.”

By Terry Painter, President   
Apartment Loan Store and Business Loan Store