The rent hike, the cramped stockroom, the delivery truck that blocks customers because there is no loading area. 

You built a bakery that sells out by noon, a thrift store that doubled online orders, a gym that has a waitlist for evening classes.

The space did not grow with you.

Ownership changes the tone of your days.

A commercial real estate loan can turn monthly rent into equity, give you room to expand production, and let you design a layout that fits the work you actually do. 

Lenders will still ask for proof. That part is fair. 

The better you understand what counts as proof, the faster you move from wishful thinking to a clean approval.

What Counts as a Commercial Real Estate Loan

A commercial real estate loan funds a property your business uses to operate. 

Storefronts. Light industrial. Office. Mixed-use. 

The test is simple: Will your company work there most of the time?

If yes, it is usually owner-occupied and lenders view that positively. 

If you plan to rent most of it to others, it moves toward investment and the underwriting lens shifts.

Key ideas you will hear and should be ready to talk about:

LTV (Loan-to-Value)

This is simply how much of the property’s appraised value or purchase price the bank is willing to cover versus how much you’re putting down.

  • Example: If the building costs $700,000 and you borrow $490,000, the bank is covering 70% of it. That 70% is your LTV. The lower your LTV, the safer you look to the lender, because you’ve got more of your own money in the deal.

DSCR (Debt Service Coverage Ratio)

This is a fancy way of asking: after paying expenses, do you make enough to cover the loan payment, and then some?

  • Example: If your business has $180,000 in net operating income (NOI) and your yearly loan payment is $120,000, you’ve got a DSCR of 1.5. That means for every dollar you owe, you make $1.50. Lenders like to see at least a little breathing room here, usually above 1.25.

What Lenders Study

Approval is a checklist that tells lenders about your ability to run the property without hiccups.

Cash Flow Strength

This is where DSCR (Debt Service Coverage Ratio) lives. For example, a business earning $210,000 in net income with $132,000 in annual loan payments has a healthy cushion that can survive churn. If your margin feels thin, focus on building predictability. Presell memberships, lock in catering contracts, or add subscriptions that show up on a bank statement. These steady revenues reassure lenders that repayment won’t depend on guesswork.

Collateral and LTV

Every loan leans on collateral. Most files that stall do so at this stage. If the property appraisal comes in low, the math changes immediately. The best move is to prepare for that possibility early. Run the numbers on a larger down payment scenario before ordering the appraisal, it calms the room and gives you control over the conversation.

Credit and Operator History

Underwriters look at more than spreadsheets, they read behavior. On-time vendor payments, clean personal credit, and relevant operator experience all carry weight. A coach who grew a class-based gym over five years signals stability very differently than a first-time owner testing a brand-new format.

Liquidity and Reserves

Liquidity is your stamina. Six to twelve months of accessible cash after closing tells the bank you can absorb a slow quarter without missing payroll. Owners usually feel this line most when equipment breaks down. With reserves in place, what could have been a crisis becomes just another maintenance ticket.

Property Issues

Finally, the property itself can make or break the deal. Zoning, parking, ventilation, power, floor load, grease traps, and occupancy all matter. If any of these raise questions, handle them upfront. A boutique lender that verifies borrower requirements early can move much faster. For instance, a daycare that confirms parking ratios before underwriting avoids costly mid-process redesigns.

Quick math to keep handy.

  • NOI equals revenue minus operating expenses before debt service and income taxes. 
  • DSCR equals NOI divided by annual debt service. Target 1.25 or higher. 
  • LTV equals loan amount divided by appraised value. Lower is safer. 

The Process in Real Life

Owners feel time pressure more than anything else, so the process works best when kept simple.

  • Prequalification. Upload clean financials and a one-page summary of the plan. A few days. 
  • Term sheet. Ballpark structure and conditions so you know what to chase. About a week. 
  • Underwriting. Deep review of numbers and narrative. Two to four weeks. 
  • Reports. Appraisal and environmental. Two to three weeks and they can run in parallel. 
  • Closing. Final conditions, legal docs, funding. About a week.

If a lease deadline is driving the decision, set calendar reminders for each stage right now. 

Share them with your GC, your accountant, and the person who handles your bank statements.

The timeline moves when everyone answers on time.

Get Out of the Lease Roulette with ROK Financial 

You want space that fits the work you actually do. You want customers to find you in the same place next year, not after a forced move across town.  Commercial real estate loans can get you there, but only if the story and the numbers agree.

This is where we come in. 

At ROK Financial, we live in this world every day.  We ask the hard questions now, so the bank does not ask them three days before closing.

Send us your last two years of financials, a rough budget, and what the property needs to do for your business. We will review DSCR, LTV, property usage, reserves, and the path to approvals.

We will tell you what is strong, what needs shoring up, and what to fix this week.  If the building fits and the plan is real, we will help you get to the table.

Trade rent anxiety for ownership planning with the assistance of Rok Financial. 

FAQs

Here are some FAQs about how to qualify for commercial real estate loans and what to expect.

How much space do I need to occupy to count as owner-occupied?

Most lenders and SBA programs expect you to use at least 51% of an existing building. For new construction, plan for about 60%.

Will I need a personal guarantee?

Usually, yes for small and mid-sized deals. Expect a personal financial statement and credit review alongside business docs.

Can a newer business qualify at all?

Yes, if you offset risk. Bring a stronger down payment, clean credit, signed contracts or pre-sales, and a clear operating plan.