Custom
Business
Solutions
Commercial Lending has a far more conservative
approach to mortgages than does Residential Lending. Further,
Commercial Lending defies being narrowly categorized; the uniqueness
in Commercial mortgages makes each one a stand-alone project.
Professional expertise in packaging Commercial submittals is a
critical factor in achieving your goals.
Commercial financing is required on all non-residential
properties. The following six categories have a multiplicity of
commercial types within each classification:
- Multi-Family
- Office
- Retail
- Industrial
- Health Care
- Apartments
A clear, concise, and thorough business plan
is indispensable. Some of the components required in the evaluation
of your existing or proposed business are:
- Last three years' full tax returns, including
all schedules
- Complete financial statements for your business:
YTD P & L Statement; Current Balance Sheet; Full Collateral
Sheet
- Complete personal financial statements,
resumes, & tax returns, including all schedules, of business
principal(s)
- Personal credit review of principal(s)
if operation of business is less than 36 months
- Pro Forma for the year forward from application
date as well as the mortgage term
- Income projections for the year forward
from application date
- File copies of all leases
- All tax bills, federal & state, as related
to the business
- Property Insurance certification
- Last commercial property appraisal
Additional exhibits and/or support documentation
make be required during the processing of a commercial mortgage.
Although commercial lending has some of the
required underwriting criteria which is also used in residential
lending, such as the D.T.I. (Debt-To-Income) ratios, and L.T.V.
(Loan-To-Value), there are unique standard factors utilized as
evaluation models in commercial lending which are not found in
residential lending.
One of those factors in commercial income-producing
property given considerable weight by underwriters is the D.C.R.,
the debt coverage ratio, also known as the D.S.C.R., or
debt service coverage ratio. The D.C.R. is the monthly
debt of the business compared to its net monthly income. D.C.R.'s
are predetermined by property type and risk level. Generally,
negative cash flow is a critical issue; however, exceptions to
the guidelines are made when particular adjunct criteria is met
on loans under $200,000.
A 20% down payment is often the norm in commercial
lending purchases, whereas it is not unusual to secure a no-down
payment residential home loan in today's marketplace.
A diligent analysis of Fair Market Value and
Fair Market Rent is part of the process. The local and regional
markets, accessability, locale, and the general quality of the
property are considered. Mixed and special usage is examined carefully.
Whether refinancing or purchasing, each property
is distinctive and has its own defining characteristics and business
potential. Should you have specific objectives for your existing
or new business, we would be pleased to discuss with you the Custom
Business Solutions available to you.
E-MAIL: CommercialDivision@1stopmortgage.net
