At some point in your life you may need to think about working with a commercial lender. You want to make sure that you have clear expectations and know what you are doing when it comes to all of your financial decisions. That is why it is best to be prepared and keep an open line of communication at all times.

A commercial lender offers a variety of loans, but they all pretty much have the same factors that all lenders look at when evaluating companies for approval. It usually comes down to the 3 C’s: Character, Cash flow and Collateral. The 3 C’s are an effective and useful way to understand the lending process.

Often times the character of the borrower plays a large role when it comes to being accepted for loans. Lenders want to make sure that the borrower they are lending to is trustworthy and will be able to pay back the loan without much hassle. This is where credit score and bankruptcy history play a big factor in the decision of the approval. If the loan is for a larger amount, your business credit score could also play a role in getting accepted. But, the overall character of the borrower is what will really comes into play during the decision process.

The next C of the 3 C’s of lending is cash flow. A commercial lender never wants to have to be forced to foreclose on a loan, so they need to thoroughly research the borrower’s cash flow. Looking at a borrower’s cash flow is something that every lender will most likely do and will always put into high consideration when deciding on approval. Also, the predictions of future cash flow are going to be evaluated, so be sure to keep your long-term financial goals in mind and always have a plan.

Collateral also plays a large part when it comes to get getting approved for a loan from a successful commercial lender

Luckily, for most inexperienced borrowers, collateral doesn’t really play a significant role in getting a loan approved, even though a commercial lender does take collateral into some consideration. However, all lenders are all different, so some will be more likely to accept deals that come with a stronger collateral. But collateral is very rarely a deal breaker. s long as you can provide the right documents with proof of substantial cash flow and a good credit score, you have a high chance of being approved.

But if a loan is on the verge of denial, a commercial lender might then take collateral into even a higher consideration

Sometimes a financial deal may lack strong cash flow along with a less than impressive character, leaving some loan decisions to rely heavily on collateral. This will of course lead to more expensive financing in the end because of the higher risk. It is a good idea to offer high collateral if for some reason, you think your cash flow and credit score is going to play a role in denial, but make sure to take into consideration all of the terms so that you know that the deal is worth the collateral.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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