Thread: Commercial Real Estate Question re: Loans

So I have heard from someone that if you are looking to get into commercial Income properties that your personal credit does not matter and that they only look at the numbers on the income property to make sure that they make sense and make the loan off that. Is that true? I have searched online, but can't really seem to find much information about that.

Commercial loans must make sense for the investor or bank, and yes for the most part require a properties income to make sense. PM me if you have any further questions.

Lenders will evaluate borrowers by the 5 C's. In today's market, a good credit score plays a larger role more than ever before. There may be some exceptions but only under special circumstances. I hope this helps.

yes thank you for the info.

Originally Posted by gegooree

So I have heard from someone that if you are looking to get into commercial Income properties that your personal credit does not matter and that they only look at the numbers on the income property to make sure that they make sense and make the loan off that. Is that true? I have searched online, but can't really seem to find much information about that.

You will definitely be judged by your credit score. If a bank gives you a loan for the property, you are the one managing that property. You could take the income and not make your payment. If you've defaulted or went late on past loans, what is to say that you won't on a new loan even if it cash flows. Foreclosure is a pain and costs money to a lender. During that time, not only are they spending money, they are losing out on the rental income that the current owner is pocketing......so in sumation....it matters.


The property must first cash flow but all the pieces after that must fall into place as well. If the property doesn't cash flow for the amount you're requesting, the process stops there.

Considering that you probably do not own any commercial properties, the bank is going to want a personal guarantee from you that you will not default on the loan. They will take into account you credit score when judging you for a loan.

it all depends on the property you want to finance.

If we are talking for an investment property, lets say for example, a multifamily building, then certain banks will do non-recourse loans, which means that they do not require personal guarantees, but just the rental income of the property itself.

there are so many scenarios and types of products that cannot be analyzed further with more specific info.

Banks generally see three kinds of debtors: large business, small business, individual.

If you're a large business (like a public company) you have your own credit rating, but it's not done by the credit bureaus, it's done by firms like Moody's and S&P. You also have major liquid assets. They see you as a commercial account.

For small businesses and individuals, it's generally the same difference. You don't have a credit rating on the business, nor likely massive liquid assets for collateral, so they're looking at the individual (normally the CEO or other principals) pretty heavily. If you are buying a place that has current renters (or specifically rental income and signed leases) they are likely to give you "credit" for that cash flow when calculating the loan. If you personally have income from other sources, they are also likely to give you that same "credit" when calculating, assuming your personal credit rating is good. So they lay the math out:

+ Rental property income
- Rental property expenses (including mortgage)
+ Personal income
- Personal expenses (existing mortgage, car payment, etc.)

If the property itself is not net-positive cash-flow (which it generally won't be, otherwise why would someone sell it) then they're going to look at you personally. If you have the cash flow to cover the difference and a good credit score, they're likely to approve the loan (and probably want a personal guarantee, meaning they're loaning you the money). You're going to have a harder time finding someone that will loan money to an LLC or an individual investor with a bad credit score. The property would have to be such a good deal that the bank couldn't possibly lose money on it, and if that was the case, it wouldn't be for sale at that price to begin with.