How to Qualify for a Commercial Real Estate Loan: What Lenders Look For

Securing a commercial real estate loan is a key step for investors looking to acquire, refinance, or improve income-producing properties. But unlike residential loans, which focus heavily on personal credit, commercial loans are primarily evaluated based on the performance and potential of the property itself—alongside the borrower’s experience and strategy. 

At TaliMar Financial, we work with real estate investors and developers across a range of commercial property types, from small retail centers to multi-tenant industrial buildings. In this article, we’ll walk through the core criteria lenders evaluate when reviewing a commercial loan request and how investors can improve their chances of getting approved. 

1. Property Cash Flow & Income Stability

One of the first things lenders examine is whether the property can generate enough income to cover the proposed loan payments. This is typically measured using the Debt Service Coverage Ratio (DSCR), which compares a property’s net operating income (NOI) to its annual debt obligations. 

• A DSCR of 1.20 or higher is generally preferred, indicating the property earns at least 20% more than its debt payments. 

• Stabilized properties with long-term leases and low vacancy rates are more attractive to lenders. 

If the property is underperforming, lenders may still consider the deal if there’s a solid plan in place to boost income—through renovations, lease-up, or repositioning. 

2. Loan-to-Value Ratio (LTV)

The Loan-to-Value (LTV) ratio measures the loan amount compared to the property’s value. It helps lenders assess risk in the event of a default. 

• For most commercial loans, LTVs range from 60% to 75% depending on the asset type and the strength of the deal. 

• A lower LTV means the borrower is contributing more equity, which can improve approval odds and potentially lead to better terms. 

Lenders often require a recent appraisal or broker opinion of value to verify the property’s worth. 

3. Borrower Experience and Track Record

Lenders want to know that the borrower has the experience to manage the property successfully and execute the business plan. While newer investors can still qualify, a borrower with a history of successful acquisitions, renovations, or management of similar properties is seen as lower risk. 

If you’re new to commercial investing, consider partnering with an experienced operator or including a third-party property manager in your proposal to strengthen your application. 

4. Creditworthiness and Financial Strength

While credit scores aren’t always the deciding factor in commercial lending, they still matter—especially when working with private lenders or applying for higher leverage. 

• Most lenders look for a minimum credit score in the mid-600s or higher. 

• Personal and business financial statements, liquidity, and net worth are also reviewed to ensure the borrower can support the loan and any unexpected costs. 

In addition to credit, lenders want to confirm that you have sufficient reserves—cash set aside to cover property expenses or debt payments in case income fluctuates. 

5. Exit Strategy and Use of Funds

Especially with short-term financing like bridge loans, lenders will want a clear exit strategy. This could include: 

• Refinancing into a permanent loan after stabilization 

• Selling the property after renovations 

• Paying off the loan through another liquidity event 

Clearly outlining how the funds will be used and how the loan will be repaid helps lenders evaluate the project’s feasibility and risk profile. 

How TaliMar Financial Approaches Commercial Loans 

At TaliMar Financial, we take a practical, asset-based approach to underwriting commercial real estate loans. We understand that every deal is unique, which is why we look at the full picture—property potential, borrower experience, and the strength of the exit strategy—rather than just checking boxes. 

Whether you’re acquiring a value-add asset, repositioning an underperforming property, or looking for quick capital to move on a new opportunity, our direct lending model ensures a responsive and flexible process. 

Final Thoughts 

Qualifying for a commercial real estate loan doesn’t have to be overwhelming. By understanding what lenders look for and preparing your financials, business plan, and property details in advance, you can increase your chances of approval and secure the capital you need to grow your portfolio. 

If you’re considering a commercial loan for your next project, connect with our team at TaliMar Financial. We’re here to help you navigate the process and find the right financing solution for your investment goals. 

About TaliMar Financial 

TaliMar Financial is a private mortgage fund that offers investors the ability to participate in the growing market of private real estate debt. Since 2008, TaliMar Financial I has focused on providing real estate investors and operators with the capital they need to purchase, renovate, and operate residential and commercial properties. Our experienced executive team has funded over $450 million in short term debt secured on residential and commercial real estate primarily throughout Southern California and has returned over $40 million to investors in monthly distributions.