Commercial financing, placed with the lender whose appetite fits the deal.
Every commercial lender has a credit box, and most of what determines whether a deal funds is whether it landed in front of the right one. Leverage, asset class, geography, sponsor strength and liquidity requirements vary more than people expect.
I work through a national network of banks, credit unions, debt funds, agency and SBA lenders. Tell me what the deal is and I’ll tell you where it fits, or tell you honestly if it doesn’t.
Owners, investors, and the people who advise them
- Business owners buying or refinancing the building they operate in
- Real estate investors adding to a portfolio or repositioning an asset
- Commercial property owners with a maturing loan or trapped equity
- Developers financing ground-up or a major repositioning
- Commercial brokers who need a buyer financed to close a listing
- Bankers and credit union lenders with a client outside what their institution does
- CPAs and attorneys with a client in the middle of a transaction
Transaction types and asset classes
Transaction
Asset class
Why lender fit decides most of it
Two lenders can look at the same property and size the loan differently, because they’ll disagree on the coverage floor they need, the leverage they’ll go to, whether they like that asset class this quarter, and how much liquidity they want to see from the sponsor. None of that shows up in a rate quote.
Working through the network means the file goes to lenders whose current appetite matches it, rather than to whoever I happen to be captive to.
Appetite also moves. Property types tighten, loan-to-cost comes down, a lender quietly stops doing a category. I sit down with commercial bankers and credit union lenders around metro Atlanta on a regular basis, and knowing where appetite actually sits before a term sheet arrives is most of the value.
Run the numbers before you call a lender
Four ratios decide most commercial deals. If you know where yours land before you go looking for debt, you stop spending weeks on lenders who were never going to fund it. Free, and it doesn’t ask for your email.
Property
Debt terms
| Year | Payments | Principal | Interest | Ending balance |
|---|
Estimates for planning. Actual structure, pricing and proceeds come out of a lender’s underwriting on the real property and the real borrower.
Four ratios decide the deal. Everything else is negotiation.
A lender is not really evaluating you. It’s evaluating whether the property services the debt with room to spare, and what happens to their basis if it doesn’t.
DSCR
Net operating income ÷ annual debt service
The ratio that most often sets your loan size. At 1.25x the property throws off $1.25 for every dollar of payment. Many lenders floor somewhere between 1.20x and 1.25x, though it moves with asset class and lender type. When a deal gets cut back, coverage is commonly the constraint that ran out first.
LTV
Loan amount ÷ property value
The one everyone quotes and the one that binds least often. It matters at the margins and on lower-income-producing assets. On a stabilized property the coverage test often binds before the leverage test does.
Debt yield
Net operating income ÷ loan amount
The one investors skip and lenders don’t. It ignores rate and it ignores appraised value, so it can’t be improved by cheap debt or a generous appraisal. That’s exactly why it exists. Nine to ten percent is a common floor, depending on the lender and the asset.
Term vs. amortization
Payment size vs. payoff date
Two different numbers, and mixing them up is expensive. Amortization sets the payment. Term sets when the loan comes due. A 25-year amortization on a 7-year term leaves a balloon, and refinancing it is a rate risk you own, not the lender.
Enough to give you a real answer
If you don’t have all of it, send what you have. I can usually tell you in one call whether it’s worth putting a package together, and I’d rather say no early than waste a month of your time.
Gwinnett County and metro Atlanta
I’m based in Gwinnett, and a lot of what I see here is industrial and owner-occupied. I keep running notes on development, the corridors, and what’s moving.
Bring me a deal that didn’t pencil.
Thirty minutes. Bring the rent roll and the T-12 if you have them, the address if you don’t. Worst case you leave knowing which ratio is the constraint.