By Justin Ashcraft, President, Northern Ridge Capital. More than $600M in commercial real estate deal experience. California DRE #02093377. Last updated October 2026.
To get a commercial property loan approved, you need a property whose net operating income covers the new loan payments by the lender's minimum ratio, a loan amount inside the lender's loan-to-value limit, a borrower and guarantors with the financial strength to stand behind it, and a complete file that proves all three.
Key points
- Two tests size the loan: debt service coverage (net operating income divided by annual debt service) and loan to value. The lender takes the lower result.
- The file is mostly property operating statements, a rent roll, leases, signed financial statements and tax returns for the borrower and guarantors, an appraisal and title.
- Under FDIC rules, a commercial real estate loan above $500,000 needs an appraisal from a state certified or licensed appraiser.
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What do lenders look at first?
The property's income. For an income-producing building, repayment comes from the rent. The OCC's Comptroller's Handbook, Commercial Real Estate Lending (version 2.0, March 2022) puts it this way: repayment "typically depends on the property's ability to service debt from cash flow." The handbook lists what examiners expect a bank's policy to cover, including minimum debt service coverage, loan-to-value limits by property type, minimum debt yield, and standards for the borrower's and guarantors' financial condition.
After the property, the lender looks at you. Then it looks at whether the paperwork backs up both.
What documents do you need for a commercial property loan?
Lenders vary in format, but the core file looks like this.
| Document | What the lender uses it for |
|---|---|
| Property operating statements, historical and current | Builds the net operating income that sizes the loan |
| Rent roll | Checks occupancy, rents and tenant concentration against the statements |
| Leases | Confirms terms, expirations and renewal risk |
| Signed financial statements for borrower and guarantors | Shows net worth, liquidity and contingent liabilities |
| Tax returns and Schedule K-1s | Supports a global cash flow across your other entities |
| Appraisal | Sets the value the loan-to-value test runs against |
| Title, entity documents and insurance | Confirms who owns the property and who can sign |
The OCC handbook names most of these directly. Its list of what banks keep in a loan file includes "signed financial statements for borrowers and guarantors, and operating statements and rent rolls for the property, as applicable," along with a title insurance policy. On the borrower side it says global cash flow analysis "may require integrating cash flows from business financial statements, tax returns, and Schedule K-1 forms for multiple partnerships, limited liability companies, and corporations."
The appraisal requirement is set by regulation. FDIC rule 12 CFR 323.3 requires an appraisal by a state certified or licensed appraiser for real estate-related transactions, exempting commercial real estate transactions of $500,000 or less. A $5 million to $30 million loan is well above that line.
How do lenders decide how much they'll lend?
They run two tests and lend the smaller answer. The OCC handbook defines the debt service coverage ratio as net operating income divided by annual debt service, and notes that properties with volatile cash flows "may warrant a higher ratio." The loan-to-value test multiplies the appraised value by the lender's maximum.
For a sense of the numbers, Freddie Mac's fixed-rate multifamily term sheet, dated April 2026, sets a 1.25x minimum amortizing debt coverage ratio and a maximum loan to value of 75% for terms of 5 to under 7 years and 80% for 7 years or more. Bank, debt fund and life company limits differ, and they differ by property type.
Hypothetical example: a property with $1,000,000 of net operating income and a lender minimum of 1.25x can carry at most $800,000 a year of debt service. The rate and amortization turn that into a loan amount. Our commercial refinance calculator does the conversion and shows whether coverage or value sets your loan.
The handbook also describes debt yield, net operating income divided by the loan amount, as a check that is "independent of the interest rate, amortization period, and capitalization rate." Some lenders use it as a third test.
What do lenders want from the borrower?
Enough financial strength that the loan doesn't rest on the building alone. The OCC handbook says bank policies should set standards for the borrower's and guarantors' assets and liquidity, global cash flow, direct and contingent liabilities, and "minimum requirements for the borrower's initial hard equity." It adds that guarantor liquidity "should be verified by the bank," so a statement without bank or brokerage records behind it won't carry much weight.
Structure matters too. Freddie Mac's term sheet says the borrower "must typically be a Single Purpose Entity" and that its loans are "non-recourse except for standard carve-out provisions." Other lenders may ask for a full or partial personal guarantee. That's a term worth comparing across offers.
Are lenders approving commercial property loans right now?
Banks loosened a little this year. The Federal Reserve's July 2026 Senior Loan Officer Opinion Survey, released 3 August 2026, found that "moderate and modest net shares of banks reported having eased standards for loans secured by nonfarm nonresidential (NFNR) properties and multifamily properties, respectively" over the second quarter. Standards for construction and land development loans "remained basically unchanged on net."
Those are averages. Two lenders can read the same file and size it very differently.
How do you submit a deal to Northern Ridge Capital?
Start with the basics on our deal submission form: property type, city and state, loan purpose, the amount you need, an estimated value and your timeline. Estimates are fine at that stage. We review the deal, tell you what's missing from the file, and take it to the lenders in our network that are active on that profile. We work on loans of $5 million to $30 million.
Commercial loan approval FAQ
What DSCR do commercial lenders require?
There's no single number. Freddie Mac's April 2026 fixed-rate multifamily term sheet sets a 1.25x minimum amortizing ratio. The OCC handbook notes that properties with volatile cash flows, such as hotels, may warrant a higher ratio.
Do I need an appraisal for a commercial property loan?
Yes, at any size we work on. FDIC rules require an appraisal by a state certified or licensed appraiser for commercial real estate transactions above $500,000.
Can I get a commercial property loan without a personal guarantee?
Sometimes. Freddie Mac's fixed-rate multifamily loans are non-recourse except for standard carve-outs, according to its term sheet. Other lenders want a guarantee. Recourse is one of the terms to compare side by side.
Is Northern Ridge Capital a lender?
No. We're a commercial real estate mortgage broker, not a lender. We charge a 1% origination fee, paid only when the deal closes with whichever lender in our 700+ network gives you the best structure. Commercial real estate only, no residential.
About Northern Ridge Capital
Northern Ridge Capital is a commercial real estate debt brokerage placing $5 million to $30 million loans across multifamily, retail and industrial in California, Texas, Florida, Georgia and Indiana. Justin Ashcraft, the president, has more than $600M in commercial real estate deal experience and holds California DRE license #02093377. We run your file across a network of 700+ lenders and bring back the structures that fit. More on how that works on our commercial mortgage broker page.
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This article is general information, not a loan commitment, and not legal, tax or investment advice. Figures are attributed to their sources and dated; they describe the market, not any specific loan. Terms depend on the property, the sponsor and market conditions at the time of application. Northern Ridge Capital is a commercial real estate mortgage broker, not a lender. See our full disclaimer.