Commercial Loans

Commercial properties are classified as residential complexes with anything over 4 units or business or commercial use properties. Unlike residential lending, commercial investment properties are viewed more conservatively. Every loan application is unique and evaluated on its own merits, but there are a few common criteria lenders look for in commercial loan packages.

Financial Analysis
A key component in making an underwriting evaluation is the debt coverage ratio - defined as the monthly debt compared to the net monthly income of the investment property in question.

Loan to Value
Unlike residential lending, commercial investment properties are viewed more conservatively. Most lenders will require a minimum of 20% of the purchase price to be paid by the buyer. The remaining 80% can be in the form of a mortgage provided by either bank or mortgage company.

Credit Worthiness
For businesses less than three years old, personal credit of principals will be evaluated. This may hold true for longer periods of time for tightly held companies. For corporations, business performance and credit ratings will be evaluated with a proven track record.

Property Analysis
Fair Market Value and Fair Market Rent will be analyzed. Special use property may require additional underwriting. Age, appearance, local market, location, and accessibility are some other factors considered.