What Do Lenders Consider When Financing a CRE Loan?

Take a look at what lenders consider when funding a CRE loan and how to set yourself up for success.

Commercial real estate (CRE) loans are often more complex than a standard residential loan. With that being said, there are many factors that can influence a lender's decision when it comes to financing a CRE loan. While there are many instances where lenders are presented with unique situations from the borrower, there are some general factors that all lenders will likely take into consideration regardless of the complexities of the transaction.

Credit Score

Lenders want to see that the borrower has a good credit score. This helps paint a picture of how responsible the investor is with their finances, revealing the level of risk involved. Most lenders want to see a credit score of 680 or higher when financing a CRE loan. Private money lenders may be more flexible and willing to work with a lower credit score, but it is not guaranteed.

Repayment History

A lender’s top priority is making sure they will be getting the money they are lending back. In order to determine the likelihood of this, lender’s will look into a borrower's repayment history. If there is a delay in repayment there will be a drop in credit score.The longer the delay, the more the credit score declines.

Duration, Types, and Quantity of Credit Lines

The longer you have built up your credit, the more dependable you appear to a lender, so long as those credit lines have been well maintained. Another way to ensure your credit score remains high is by minimizing the credit applications you have open. If a lender sees that a borrower has applied for several new lines of credit or loans, this poses a red flag and will likely result in refusal of the loan application.

Current Debt

The ratio of outstanding debt to the loan amount being taken needs to be relatively low in order to obtain a new CRE loan. Even if the borrower makes timely payments, a lender will not want to see a large amount of current, outstanding debt.

There are certainly other factors that can influence a lender’s decision whether or not to approve a loan, but it is helpful to at least be aware of these general contributors before applying for a new CRE loan to give you the best chances of being approved.

The overarching theme here is to make sure and maintain your credit score and debts properly if you’re hoping to be approved for a loan. Finding a lender that is flexible and willing to work with you to meet your unique needs is one thing, but finding a lender that is willing to take on the risk of lending money to someone who appears irresponsible is nearly impossible.

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

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