Borrowers usually come to a commercial real estate financing conversation focused on rate and term. Lenders are usually looking somewhere else first.
Before rate becomes a real discussion, most commercial files get filtered through a small number of benchmarks. Three of them do the majority of the filtering: the debt service coverage ratio, the borrower’s credit profile, and whether the lender requires a deposit relationship. A file that clears all three moves. A file that misses one often stops, sometimes without a clear explanation of why.
Here is what each one measures, and where different lenders draw different lines.
Debt service coverage ratio: what the property can carry
DSCR compares the property’s net operating income to the debt payments the loan would require. A 1.25x DSCR means the property generates 25 percent more income than it needs to cover the payment. A 1.00x DSCR means it covers the payment exactly, with nothing left over.
The ratio is the single most influential number in most commercial real estate underwriting because it answers the question the lender cares about most: does the asset itself support the debt.
Traditional bank underwriting commonly looks for something in the range of 1.25x. That cushion is deliberate. It absorbs a vacancy, a rate reset, a roof, a bad quarter for a tenant. It is a reasonable place for a depository institution to sit.
It also disqualifies a large number of properties that are performing adequately. A stabilized asset producing a 1.10x coverage ratio is not a distressed asset. It is a property with a thinner cushion, and whether that is acceptable depends on the rest of the file: the borrower’s other resources, the asset type, the lease structure, the market, and the plan.
BLC’s conventional lending program publishes a minimum of 1.00:1 DSCR. That is not a lower standard applied casually. It reflects a different review process, one where the coverage ratio is one input among several rather than a gate that ends the conversation before the rest of the file is read.
FICO: what the borrower’s history signals
Commercial real estate loans are secured by real property, and they are still underwritten with attention to the person or people behind them, particularly on full-recourse structures with personal guarantees.
A credit score on a commercial file is a proxy. It signals payment history and how the borrower has handled obligations over time. It is genuinely useful information and it is also incomplete, which is why it is a poor sole decision criterion.
Sub-680 scores are common among experienced commercial real estate borrowers for reasons that have little to do with the current transaction. A prior workout that has long since resolved. A period of high utilization during an expansion. A dispute that took two years to clear off a report. A file where the score is 655 and the borrower has operated the same asset type profitably for fifteen years is a different file than the score alone suggests.
BLC publishes a minimum 625 FICO for the conventional program and 650 for SBA CDC/504 financing. The published number is a floor, not the whole review. Prior ownership and management experience is looked at directly.
Deposit relationships: the requirement that does not show up in the rate
This one is easy to miss because it is not priced into the quoted rate, and it can be the most expensive condition in the package.
Many bank commercial loans come with a deposit relationship requirement: the borrower moves operating accounts to the lender, and often maintains a compensating balance. The rate on the term sheet looks competitive. The actual cost of capital is different once a meaningful amount of working capital is locked in a low-yield account for the life of the loan.
For a business that needs its cash working, that requirement can be a genuine constraint on operations, not just an inconvenience. It is worth calculating rather than accepting as standard.
As a private non-bank lender, BLC does not require borrowers to maintain deposit balances as a condition of the loan. For a borrower comparing two term sheets, that difference belongs in the comparison alongside rate and fees.
What to do if a bank has already passed
A decline from a bank is information about that bank’s credit box. It is not a verdict on the transaction.
The useful next step is to find out which benchmark the file actually missed. Was it coverage, credit, the deposit condition, the property type, a policy limit on that asset class, or the bank’s current appetite in that market? Those have different answers. A property that missed on DSCR may work at a different loan amount. A borrower who missed on FICO may work with a different structure. A property type a bank does not lend on may be entirely ordinary collateral somewhere else.
It is also worth checking whether permanent debt is the right instrument at all right now. If the property needs time, occupancy, or work before it will carry long-term debt cleanly, bridge lending may fit the current phase better than pushing a permanent loan into a shape it does not want to take.
What makes a review productive
A lender can give a meaningful read quickly when the file arrives complete. That means the property type and location, the requested loan amount, the cost basis, whether this is a purchase, refinance, or cash-out refinance, current occupancy and lease structure, recent operating statements, the borrower’s background with this asset type, and the timeline.
Sending the difficult parts of the file up front rather than holding them back generally speeds things up. A lender who learns about the coverage ratio in week one can structure around it. A lender who learns in week five has to re-underwrite.
BLC’s case studies show how transactions that did not fit a conventional bank profile were structured and closed. To have a specific transaction reviewed, send the scenario to BLC with the details listed above.
Information in this article is provided for general informational purposes only and does not constitute a commitment to lend or legal, tax, or accounting advice. Underwriting benchmarks described here reflect published program terms and are subject to change. All financing requests are subject to underwriting, collateral review, borrower qualifications, lender approval, and transaction-specific terms.
