Are Commercial Real Estate Loans Hard to Get? What Borrowers Need to Know
Are commercial real estate loans hard to get? Matt Bingaman explains what lenders look for and how to improve your approval chances.
One of the most common concerns I hear from business owners and first-time investors who are exploring commercial real estate is this: “Are commercial real estate loans actually hard to get?” The honest answer is: it depends — and knowing what it depends on is exactly what separates the borrowers who get funded from those who don’t.
Let me give you a realistic picture of what the CRE lending landscape looks like and what you can do to put yourself in the best possible position.
The Short Answer: CRE Loans Are Attainable, But They Require Preparation
Commercial real estate loans are not impossibly difficult to obtain, but they are significantly more rigorous than residential mortgages. Lenders in the CRE space are evaluating a more complex set of variables, and they expect borrowers to come prepared with solid documentation, credible financials, and a clear investment thesis.
The borrowers I see struggle with CRE loan approvals are typically those who underestimate the preparation required or overestimate how forgiving the process is. The ones who succeed come in with clean, comprehensive packages and a deep understanding of their deal.
What CRE Lenders Are Actually Looking For
Property Performance
The income-generating ability of the property is paramount:
- Debt Service Coverage Ratio (DSCR): Most lenders require a minimum of 1.20–1.25x — meaning the property generates at least 20–25% more income than needed to cover debt payments
- Occupancy and rent roll stability: Lenders want to see stable, creditworthy tenants with remaining lease terms
- Net Operating Income (NOI): A clean, well-documented NOI with verifiable income and expenses
Loan-to-Value (LTV)
- Most CRE lenders cap LTV at 65–75%, depending on asset class and risk profile
- Higher LTV requires stronger property performance and borrower credentials
- Some programs (SBA 504) allow up to 90% LTV for owner-occupied properties
Borrower Strength
- Credit score: Generally 680+ for conventional CRE loans; higher for better terms
- Net worth and liquidity: Most lenders want to see borrower net worth equal to or greater than the loan amount, with post-closing liquidity of 10–20% of the loan
- Experience: Lenders are more comfortable with borrowers who have a track record in CRE; first-time investors may face higher scrutiny
Business Performance (for Owner-Occupied Properties)
- Two to three years of business tax returns
- Evidence of consistent revenue and profitability
- Demonstrated ability to service debt from business cash flow
Factors That Make CRE Loans More Challenging
- Rising interest rates: Higher rates reduce DSCR, making it harder to qualify on the income side
- Tightening credit conditions: Banks periodically pull back on CRE exposure, reducing competition and increasing standards
- Weak property performance: Vacancy, below-market rents, or undocumented income create red flags
- Complex ownership structures: LLCs, partnerships, and trusts require additional documentation and transparency
- Special purpose properties: Assets with limited alternative uses (car washes, gas stations, churches) face more restrictive lending criteria
How to Improve Your Chances of Getting a CRE Loan
Here’s the practical playbook I share with clients who want to maximize their approval odds:
- Prepare a comprehensive loan package: Include a professional executive summary, rent roll, three years of financials, property photos, and market analysis
- Clean up your personal and business financials: Resolve any outstanding credit issues, reduce personal debt, and document all income sources
- Right-size your loan request: Ensure the DSCR and LTV work at current market rates before approaching lenders
- Shop multiple lenders: Banks, credit unions, CMBS lenders, SBA lenders, and life companies all have different appetites and pricing
- Work with an experienced CRE advisor: Having a credible advisor in your corner signals professionalism and significantly improves lender confidence
Types of Borrowers Who Find CRE Loans Easier to Get
- Owner-occupants with SBA financing: The SBA 504 and 7(a) programs are specifically designed to make CRE more accessible for business owners
- Experienced investors with strong track records: A portfolio of successfully managed properties dramatically improves lender confidence
- Well-capitalized borrowers: Strong liquidity and net worth reduce lender risk and open doors to better terms
- Deals with creditworthy tenants and long-term leases: Properties with national credit tenants and 10+ year leases are among the easiest to finance
Conclusion
Are commercial real estate loans hard to get? They’re not easy, but they’re absolutely attainable for prepared, well-capitalized borrowers with solid deals. The key is understanding what lenders want to see and presenting your deal — and yourself — in the most credible, compelling way possible.
Call to Action: Ready to explore CRE financing and want to know exactly where you stand? Contact Matt Bingaman for a frank assessment of your deal and personalized lender strategy.