How to Get a CRE Loan

Getting a commercial real estate loan takes more preparation than a residential mortgage, but the process is predictable once a borrower understands what lenders want to see. Walking in with a complete package typically cuts weeks off underwriting and often leads to better terms because the lender sees a borrower who is serious and organized.

Pick the right lender first. Local community banks and credit unions across the Salt Lake City area handle many commercial deals up to $5 million. They know the neighborhoods, move quickly, and often approve deals that national lenders pass on. Regional banks step in for larger transactions. SBA lenders specialize in owner user deals. Private and bridge lenders serve value add plays. Matching the deal to the right lender saves time and usually produces better terms than shopping cold.

Pre qualify before shopping properties seriously. A conversation with two or three lenders produces a realistic picture of what deal size, property type, and down payment will actually work. SBA 504 requires owner occupancy. Conventional investment loans require more down payment but fewer occupancy rules. Bridge debt comes with higher rates and short terms. Knowing which path fits the borrower’s situation prevents pursuing deals the borrower cannot actually close.

Assemble documentation before applying. Three years of business tax returns, three years of personal tax returns, current personal financial statement, schedule of real estate owned, and a summary of the target property. For investment property, add rent roll, operating statements, and copies of leases. For industrial property, budget for Phase I environmental at $2,500 to $4,000. Lenders expect this package, and borrowers who deliver it quickly signal credibility.

Underwriting focuses on three things. First, debt service coverage ratio, which needs to hit 1.20 to 1.25 minimum. Second, loan to value, typically capped at 75 to 80 percent for investment property. Third, borrower strength, including credit score, net worth, liquidity after closing, and industry experience. Weakness in one area can sometimes be offset by strength in another, but weakness across all three usually ends the conversation quickly.

Utah’s property tax reset at sale directly affects underwriting. Lenders who model the seller’s current tax bill overestimate NOI and therefore DSCR, which creates a gap between approved loan terms and what actually works after closing. Experienced commercial lenders in the Wasatch Front build the uncapped tax into underwriting from day one, which protects both the lender and the borrower from post closing surprises.

Term sheets, once issued, come with conditions. Appraisal, environmental Phase I, title, survey, lease estoppels on leased property, and any other lender specific requirements all need to clear before closing. Any one of these can delay or derail a deal. Smart borrowers lock in longer due diligence contingency periods in their purchase agreements, typically 45 to 60 days, to allow the full lender process to run.

Comparing offers across lenders requires looking beyond rate. Origination fees, prepayment penalties, recourse terms, reserve requirements, and covenants all matter. A loan with a 25 basis point lower rate and a punitive defeasance prepayment penalty can cost more over a five year hold than a slightly higher rate loan with flexible prepayment. Total cost of the loan across the expected hold period is the right comparison metric.

Omada Commercial, known as top commercial agents in Salt Lake City, walks buyers through lender selection, package preparation, and term sheet comparison across the Wasatch Front. Good lender selection and solid preparation produce cleaner closings and better long term results.