Are you planning to buy commercial real estate this year?
Or perhaps expand or renovate a property you already own? Whatever your goal, you’ll need financing tailored specifically to these kinds of investments.
And the good news is that lenders are becoming more active again.
The Mortgage Bankers Association’s (MBA) 2024 Commercial Real Estate/Multifamily Finance Annual Origination Volume Summation reports that total CRE mortgage borrowing and lending reached $498 billion in 2024.
While that’s 39% below the 2022 total ($816 billion), it shows a 16% increase from 2023’s $429 billion.
MBA’s survey recorded $411 billion in loans closed by commercial mortgage brokers last year — up 34% from the $306 billion reported in 2023.
Factoring in data from smaller and mid-sized private commercial lenders brought the total market estimate to $498 billion.
Even with momentum returning, the CRE requirements remain strict.
Applying for a commercial real estate loan is not the same as getting a residential mortgage or a standard business loan. It involves more complex requirements and stricter financial evaluations.
Before you start your application, make sure all your financial and property information is ready for a smoother process.
How do you qualify for a commercial real estate loan?
Most lenders look at the same core criteria when approving a commercial real estate loan. Know these early and you can prepare stronger documentation and improve your chances of getting approved.
1. A Perfect Credit score
Some loan types, such as commercial mortgage-backed securities (CMBS) loans, place less emphasis on credit scores, but most lenders still require a solid credit profile as part of the process. With a strong credit score, you can show lenders how responsible you are in managing debts, increasing your likelihood of securing favorable loan terms.
2. Minimum loan amount
While requirements differ by lender and property class, many programs require you to take out a loan of at least $1 million. There are exceptions apply for smaller multifamily properties or through specialized small business programs, but general guidelines expect your project to have a significant financing level to qualify.
3. Debt service coverage ratio (DSCR)
In simple terms, DSCR compares your net operating income (NOI) to total debt service.
For example, a DSCR of 1.25x means your property generates 25% more income than is needed to pay its loan obligations.
While requirements vary by property type, most want you to have a DSCR above 1.25x to ensure that there’s enough buffer in the cash flow to handle unexpected expenses or temporary income drops.
4. Loan-to-value (LTV) ratio
The loan-to-value (LTV) ratio compares the amount of financing requested to the property’s appraised value.
With this metric, lenders can determine the level of risk involved when you apply for a loan.
For example, if a property is valued at $1 million and the lender allows a 70% LTV, you’re allowed a maximum loan amount of $700,000.
Lower LTV ratios are generally viewed as less risky and may qualify for better interest rates and terms, while higher ratios could limit your options.
5. Collateral
Every commercial real estate loan requires collateral — usually the property itself. But unlike home loans, commercial loans can be either recourse or non-recourse.
A non-recourse loan limits the lender’s claim to the property if you default. They can’t come after your personal assets.
A recourse loan, on the other hand, gives lenders the right to pursue your personal assets if the property doesn’t cover the debt.
These are more common for smaller deals and first-time investors and usually come with better rates since they carry less risk for the lender.
6. Cash flow
Lenders also evaluate your cash flow to ensure that your business generates enough income to comfortably meet repayment obligations.
As a rule, lenders want to see net income that exceeds debt payments by at least 20%.
If you own a small business, lenders may scrutinize you more because of higher failure rates — expect them to review your financial statements and budgets thoroughly, and even look at your forecasts.
They may also look at your track record and management experience, as well as your length of operation.
To demonstrate financial stability, you should prepare:
- Detailed income and expense statements
- Business tax returns and balance sheets
- Proof of liquid assets or savings that could cover loan payments in the event of a temporary loss
With these documents, lenders can easily gauge your current performance and your ability to weather market fluctuations.
7. Business credit
In addition to your personal credit history, lenders will also evaluate your business credit score to assess your financial stability. This score can influence your down payment and repayment terms, as well as the interest rate.
Your company must be legally structured as a recognized business entity to qualify for a commercial loan.
It has to be a formal organization, such as an S corporation or a limited liability company (LLC).
8. Guarantor and income assets
In some cases, lenders will look for a personal guarantor to secure the loan. This can be you or another person who’s personally responsible for repaying the loan if your business defaults.
Before approving the application, lenders will review the guarantor’s credit score and income sources, as well as their assets.
You will be considered a good guarantor if you have a strong credit profile and a steady income stream.
With this in mind, you might have difficulty getting approved when you have a history of issues, such as court judgments and foreclosures.
What’s the best way for a small business to get approved for a commercial property loan?
Getting approved for a commercial real estate loan can be tough especially for small business owners and first-time CRE investors.
But there are steps you can take to improve your chances.
1. Prove your profitability
Lenders want proof that your company is profitable and showing steady growth. A business that consistently earns revenue demonstrates stability and repayment potential.
So before applying, take the time to review your income statements and balance sheets to confirm that your business shows a healthy profit margin.
2. Choose the right property
Lenders also want to know everything that can about the type of property you want to finance, from its condition to its resale potential.
Having a specific property in mind shows them that you’re serious and helps them estimate how much they’re willing to lend.
If you apply without having already selected a property, your loan request may seem premature.
That said, if you already have a relationship with a lender, you may be able to schedule an early discussion to explore loan options and get a rough estimate of your borrowing capacity.
3. Have all the necessary documents on hand
Once you’ve selected a property, gather all the supporting documents needed for your loan application. These typically include:
- Updated financial statements
- A comprehensive business plan
- Details of the property you intend to buy or refinance
Banks and other institutional lenders also want to see evidence of a competent and experienced management team behind the business.
Presenting yourself as organized and punctual can make a strong first impression — similar to preparing for an important interview.
4. Meet the lender before you bid
If this is your first time purchasing commercial real estate, meet with your lender before submitting an offer on a property to clarify what they will require for financing approval.
Expect to discuss conditions such as:
- Environmental assessments
- Building condition reports
- Property appraisals
- Title searches
Most lenders have a list of approved professionals for these assessments, and it usually makes sense to use those recommended experts to prevent delays and save time.
5. Look beyond the rates
The interest rate is certainly important, but it is not the only factor that affects your total cost or long-term financial flexibility.
Pay close attention to the loan terms — like repayment length, payment schedule, and balloon payments — because they can directly affect your company’s cash flow and limit how much you can reinvest elsewhere.
Take time to understand the loan-to-value ratio and amortization period, too. And be sure to ask whether the lender allows payment holidays and if they offer renovation financing.
6. Allow some time
One of the most common mistakes first-time commercial real estate loan applicants make is underestimating how long the loan process takes.
Most banks need 6 to 12 weeks, and more complex deals often stretch even longer especially when appraisals and or environmental reports are required.
If you’re buying a property, the seller is likely working on a tight timeline, too — and if you can’t come up with the financing right away, the deal may fall through.
Let Private Capital Investors help you
At Private Capital Investors, we specialize in fast-approval commercial real estate loans tailored to your needs.
We finance commercial properties ranging from $2 million to $50 million, with approvals typically completed within 24 to 48 hours.
Our loan options include:
- Commercial hard money loan for fast closings and short-term opportunities
- Commercial real estate bridge loan for properties awaiting stabilization or resale
- Commercial Stated income loans are designed for small business owners who may not meet traditional bank requirements
As a direct private lender, we can fully streamline the process with minimal documentation and flexible underwriting, helping you secure capital quickly and efficiently.
Request a loan directly on our website. You may also call us at 972-865-6206 or email info@privatecapitalinvestors.com.
Sources:
- https://www.mba.org/news-and-research/newsroom/news/2025/04/24/total-commercial-real-estate-borrowing-and-lending-increased-16-percent-in-2024
- https://www.commercialrealestate.loans/how-to-get-a-commercial-real-estate-loan/
- https://www.woodsborobank.com/blog/requirements-for-a-commercial-loan/
- https://www.bdc.ca/en/articles-tools/money-finance/buy-lease-commercial-real-estate/how-get-approved-for-commercial-real-estate-financing
