What credit score do I need for a commercial real estate loan?

Forbes Advisor puts the benchmark around 680 or higher for commercial real estate loans specifically, though requirements vary by lender and loan type. A stronger credit history generally opens up more loan options and can make underwriting go faster.

Can I get a commercial real estate loan with a small down payment?

Down payments below the typical 15% to 35% range are uncommon for conventional financing. Some borrowers look into other loan structures to lower the cash needed at closing, but some down payment is generally still expected.

How is the loan-to-value ratio calculated?

Loan-to-value is calculated by dividing the loan amount by the appraised value of the property. A lower LTV generally means a larger down payment and can make approval easier.

What documents should I prepare before applying?

Most lenders ask for two to five years of business and personal tax returns, current financial statements, a schedule of existing debts, and a description of how the loan will be used.

Do new businesses qualify for commercial real estate loans?

Yes. Lenders typically ask for extra information in place of years of tax returns, such as a detailed business plan, revenue projections, and background on the owner’s industry history.

What is a debt service coverage ratio, and why does it matter?

DSCR compares a property’s net operating income to its loan payment. Most lenders want to see a ratio of at least 1.25, meaning the property earns at least 25 percent more than what’s needed to cover the debt.

What’s the difference between a commercial real estate loan and a business line of credit?

A commercial real estate loan finances the purchase or refinance of one specific property, with a fixed repayment schedule. A business line of credit works differently. It gives you revolving access to funds for working capital, and you only pay interest on what you borrow.