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Arthur L Pepperman II

Commercial Funding Tips & Observations:

Saturday, February 16, 2013 - Article by: Arthur L Pepperman II - Commercial Mortgage Solutions - Message

Although commercial lending is still tight, those lenders that are lending are becoming easier to deal with as 2013 progresses.


The economy seems to be growing, albeit spotty in places
Some lenders have grown stronger and are beginning to have more funds to lend
Lender competition is back among lenders who have cleaned up their Balance Sheets
Most lenders, who are lending, are now offering 5 and 10 year fixed rates
Commercial rates are still very low historically

With the above said, lenders are "born again" as to qualifications, so borrowers have to abide by old time qualifying criteria.


FICO scores between 620 and 660 are marginal, (except for SBA loans) meaning the rest of the qualifying criteria have to be super strong and higher rates will probably apply.
FICO's at 680 and above are generally good, but still may affect rates.
FICO's at 720 and above will get you to the top of the pile.

Property Valuations:

Cap Rates have risen as property values have fallen
Cap Rate for financible properties are now ranging between 8.5% and 11% depending on location
NOI, after lender mandated reserves, will be a main factor in determining property value for LTV purposes

Lender Mandated Writedowns & Requirements:

Gross rental income is subject to a at least 5% vacancy write down
Self Managed properties will be subject to an assumed 5% expense of Net Gross Income
Replacement reserves, depending on lender, may be applied, prior to arriving at NOI
Debt Service Coverage Ratios (DSCR) start at 1.2 for SBA & USDA loans and most Owner Occupied loans
Investor DSCR's start at 1.25
Deal weaknesses, if still fundable, may increase required DSCR to 1.3 to 1.6.


Cash or equivalent liquid reserves are required as part of the loan process
Rule of thumb ---- Cash equal to 6 months of P & I shown in combo of business checking, savings and other assets shown in your Personal Financial Statement


Arthur L Pepperman II, CCLC
Business Consultant & Commercial Lender
Commercial Mortgage Solutions, DBA CMS Funding
37 Flanders Road
Woodbury, CT 06798
866-610-7414 Fax .Arthur L Pepperman II

Business Consultant & Commecial Lender

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