The Loan Process

Underwriting focused on the basics - what's the property's value, how will the loan be repaid.  Simple and straightforward.

Cash Flow Analysis (DSCR) 

The most important component when underwriting a commercial loan request is the analysis of the subject property's cash flow. Specifically, the subject property must have enough cash flow to cover all the property expenses plus the new loan payment. The ratio used to calculate the cash flow for a commercial real estate loan is called the DSCR or DSC ratio. Typically, we target a minimum DSCR of 1.20x, meaning, for every dollar ($1.00) in debt incurred, the property must contribute one dollar and twenty cents ($1.20) in cash flow to support the commercial mortgage payment.

Loan to Value (LTV)

Unlike residential lending, commercial real estate properties are viewed more conservatively. Generally, we will require a minimum of 30% to 40% of the purchase price to be paid by the buyer when applying for a commercial loan. The remaining 60% to 70% is known as Loan To Value and is the percentage calculation of the commercial loan amount divided by purchase price. Keep in mind that the purchase price must also be supported by an appraisal. In the event that the appraisal shows a value less then the purchase price, we will use the lower of the two numbers to determine the commercial loan size. 

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.

Credit Worthiness 

For commercial loans made to a business - owner-occupied commercial property - businesses less than three years old, personal credit of principals will be evaluated.  The guarantors must have good credit and may be required to provide income documentation.