| Detail | Explanation |
|---|---|
| Property tests | Debt service coverage, loan-to-value, and often debt yield |
| Borrower tests | Experience, liquidity, net worth, credit, and legal history |
| Typical borrower | A single-purpose LLC or limited partnership with named guarantors |
| Core documents | Rent roll, trailing 12 operating statement, sponsor financials, entity documents |
| Who sets thresholds | Each lender, by program, property type, and loan size |
What do lenders require from the borrower?
Commercial lenders look at the people behind the borrowing entity because those people control the property, fund shortfalls, and sign any guaranties. The table below lists the borrower requirements that appear in nearly every commercial loan application, with what an underwriter checks on each one.
| Requirement | What lenders look for |
|---|---|
| Borrowing entity | A single-purpose LLC or limited partnership in good standing, with an organizational chart showing every owner and manager |
| Experience | A track record owning or operating the same property type at a similar size and with a similar business plan |
| Liquidity | Cash and marketable securities that remain after closing, measured against the loan size and any guaranty obligations |
| Net worth | Balance sheet strength relative to the loan amount, supported by a personal financial statement and a schedule of real estate owned |
| Credit | Credit reports on principals and guarantors, with written explanations for any late payments, defaults, or collections |
| Legal and background history | Disclosure of litigation, bankruptcies, foreclosures, and deeds in lieu, plus background and sanctions screening |
| Guarantors | Owners able to sign a full recourse or carve-out guaranty when the loan requires one |
What do lenders require from the property?
The property is the source of repayment and the collateral, so most of the underwriting effort goes here. Lenders test whether the income is durable, whether the value supports the loan, and whether anything about the site could impair either.
| Requirement | What lenders look for |
|---|---|
| Income | Stable in-place net operating income supported by leases, bank deposits, and operating history |
| Occupancy and leases | Occupancy consistent with the market, lease terms that extend past the loan term where possible, and limited tenant concentration |
| Value | An appraisal that supports the requested leverage on an as-is basis, or as-stabilized for transitional loans |
| Physical condition | A property condition report showing no deferred maintenance that the budget or reserves do not address |
| Environmental | A Phase I report with no unresolved recognized environmental conditions |
| Title, survey, and zoning | Insurable title, no encroachments that affect use, and a legal conforming use or acceptable nonconforming status |
| Insurance | Property, liability, and flood or wind coverage where required, naming the lender |
| Market | Demand, supply, and rent evidence that supports the income the underwriting assumes |
Which loan tests does the property have to pass?
Most lenders size a loan with 3 tests: debt service coverage ratio, loan-to-value, and debt yield. Each test produces a maximum loan, and the lowest of the 3 becomes the offer. There is no national standard for the thresholds, so the same property can size differently at a bank, a life company, and a debt fund.
In this hypothetical example, a lender requires 1.25x coverage, 65% loan-to-value, and a 9% debt yield, and uses an 8% annual debt constant. The property earns $800,000 of net operating income and appraises at $11,000,000 as is.
| Test | Lender requirement | Maximum loan |
|---|---|---|
| Debt service coverage | 1.25x at an 8% debt constant | $8,000,000 |
| Loan-to-value | 65% of $11,000,000 | $7,150,000 |
| Debt yield | 9% minimum | $8,888,889 |
| Loan offered | Lowest result | $7,150,000 |
Worked example result
Value limits this hypothetical loan. At $7,150,000 the coverage ratio is 1.40x and the debt yield is 11.19%, both comfortably above the requirements. A borrower who needs more proceeds would have to support a higher appraisal, find a lender with a higher leverage limit, or add subordinate capital. The loan sizing calculator runs the same 3 tests on your own numbers.
What documents do you need for a commercial real estate loan?
A first submission can be light, but underwriting requires the full list. Borrowers who assemble these documents before approaching lenders avoid the most common cause of delay, which is a lender waiting on items the sponsor could have sent on day 1.
| Document | What lenders look for |
|---|---|
| Current rent roll | Tenants, unit or suite, lease dates, rent, concessions, deposits, and vacancies that tie to the operating statement |
| Trailing 12 operating statement | Month-by-month income and expenses that reconcile to deposits and show the trend |
| Prior year-end operating statements | Consistent history, one-time items identified, and expense ratios in line with the property type |
| Leases and amendments | Rent, term, options, expense reimbursements, termination rights, and co-tenancy clauses |
| Purchase contract or payoff statement | Price, closing date, and credits on an acquisition, or the exact balance and prepayment terms on a refinance |
| Capital budget and pro forma | Scope, cost support, and assumptions for any change in income |
| Personal financial statement and real estate schedule | Liquidity, net worth, contingent liabilities, and debt maturities on other properties |
| Tax returns | Business and personal returns for the borrower and guarantors that support the financial statements |
| Bank and brokerage statements | Verification of the liquidity and equity shown in the application |
| Entity documents | Formation documents, operating agreement, and authority for the signers |
| Property tax bills and insurance | Current assessments, reassessment risk after a sale, and insurable replacement cost |
How do requirements change by loan purpose?
The core list applies to every request, but lenders add items based on what the loan does.
- Acquisition: a signed purchase contract, the seller's operating history, and a clear source for the equity
- Rate-and-term refinance: the existing loan documents, a payoff statement, and any prepayment calculation
- Cash-out refinance: a stated use of proceeds and enough seasoning or invested capital to support the new value
- Bridge or value-add: a renovation budget, a leasing plan, and a realistic exit to permanent debt or sale
- Construction: plans, permits, a contractor agreement, and a detailed budget, covered in the construction loan requirements checklist
- Owner-occupied: business financial statements and tax returns, because the operating company pays the rent that supports the loan
What causes lenders to decline a commercial loan request?
- Requested proceeds above what income and value support
- Operating statements that do not match the rent roll or bank deposits
- Post-closing liquidity that is thin relative to the loan and guaranties
- No relevant experience and no operator or manager who fills the gap
- Undisclosed litigation, defaults, or foreclosures that surface in background checks
- Environmental, title, or zoning problems found late in the process
- Near-term lease expirations or a single tenant with weak credit
Getting a request ready for lenders
Meeting the requirements is only part of the work. The request also has to reach lenders whose current programs fit the property type, size, location, and business plan. For the sequence from first call to closing, read how to get a commercial real estate loan.
Capital Partners arranges commercial real estate debt and equity from $1M to $100M nationwide. When the rent roll, operating statement, and sponsor information are in hand, send the request to a principal for review and Capital Partners will identify the lender categories that fit and the gaps to close first.
Common questions
What credit score do you need for a commercial real estate loan?
Commercial lenders do not use one standard credit score cutoff the way consumer programs do. They pull credit on principals and guarantors and weigh it alongside liquidity, experience, and the property's income. A past credit event can be acceptable with a clear written explanation, especially with private and bridge lenders.
Can a first-time investor qualify for a commercial real estate loan?
Yes, but the lender will look for experience somewhere in the structure. A seasoned property manager, operating partner, or co-guarantor with a relevant track record can offset a sponsor who is new to the property type. Expect lower leverage or more recourse until the sponsor builds a history.
Do commercial lenders require personal tax returns?
Most do when the loan has guarantors. Lenders use personal and business returns to confirm the income, assets, and liabilities shown on the personal financial statement.
Can an LLC get a commercial mortgage?
Yes. Most commercial loans are made to an LLC or limited partnership formed to own the property. The lender reviews the entity documents and underwrites the owners who control it and sign any guaranty.
How much down payment do you need for a commercial property loan?
The equity requirement is set by the lender's leverage limit and by how the coverage and debt yield tests size the loan. See the guide to commercial property down payments for how to estimate it.
Send this deal to a principal
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