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Most individuals have a general
understanding of what it takes to qualify for a home loan,
but few know what the basic requirements commercial lender's
require for commercial
real estate loans.
The 3 C's of Commercial
Mortgage Lending Overview
CommercialBanc simplifies the understanding of the
commercial mortgage
loan process by segmenting the qualifying criteria into
3 categories, or simply the 3 C's of Commercial Mortgage
Lending:
1. Commercial Real Estate Property Collateral
2. Commercial Real Estate Property Cash Flow
3. Borrower/Guarantor Credit and Income
It is important to note that the
3 C's of Commercial Mortgage Lending are applicable to most
income producing commercial real estate properties. *For
owner occupied commercial real estate, the businesses cash
flow is substituted for property cash flow.*
The 3 C's of commercial loans refer to the most
important factors in determining the approvability of a
commercial mortgage loan
request during the underwriting
process. While each commercial lender may have slightly
different definitions for the 3'Cs, depending on each respective
commercial lender's credit policy, there is one constant among them: Not
meeting any one of the 3 C's is reason enough reason to decline a
commercial mortgage loan request.
Commercial
Investment Property Loan Collateral
Collateral simply refers to the commercial real estate that
is offered as security for the commercial loan request. In
case of default, the commercial lender will exercise the acceleration
clause of the commercial mortgage and begin the foreclosure
process. In
addition, the commercial mortgage document generally
requires the borrower to assign the rents and/or leases of
the collateralized property giving the
commercial mortgage
lender additional security.
Other assets
(cross-collateralization) may be used in addition to the primary
source of collateral to secure the commercial mortgage. FF&E,
contracts, receivables, and in some cases a guarantor's
personal assets are all possible sources of
cross-collateralization.
Learn
more about commercial mortgages
learn more about
commercial real estate loan requirements
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