Public Commentary: The information below describes FG Capital Advisors’ approach to asset-based lending for commercial real estate. It is provided for informational purposes only and does not constitute investment advice or a solicitation.
Asset-Based Lending for Commercial Real Estate: How to Determine Eligibility
Asset-based lending (ABL) for commercial real estate lets owners borrow against the value of properties—office, industrial, retail or multifamily. Unlike traditional cash-flow loans, ABL places emphasis on collateral quality and recoverable value. Before underwriting, FG Capital Advisors performs a detailed review to confirm whether a deal meets lender standards.
What Is Asset-Based Lending for CRE?
ABL provides a revolving or term facility secured by real estate assets. Lenders focus on loan-to-value (LTV), property condition, occupancy and tenant credit quality. This approach can offer faster access to capital and higher borrowing limits than unsecured or cash-flow loans, provided collateral meets strict requirements.
Key Eligibility Criteria
| Criterion | Minimum Standard |
|---|---|
| Loan-to-Value (LTV) | 60 – 75 % of appraised value* *Based on market comparables and discounted cash flow. |
| Occupancy Rate | ≥ 85 % stabilized occupancy (weighted by rental income) |
| Tenant Credit | Investment-grade or creditworthy tenants |
| Property Condition | No material deferred maintenance (verified by engineer’s report) |
| Geographic Market | Major metropolitan areas or established submarkets |
| Sponsor Profile | Track record of similar assets and clean financial statements |
Typical Loan Structure & Advance Rates
- Advance Rate: 60–75 % LTV on first lien, based on appraisal and stress-tested cash flows.
- Facility Type: Revolver, term loan or combination facility, with interest-only period and amortization schedule.
- Pricing: SOFR + 300–450 bps, plus unused-line fee of 0.25–0.50 %.
- Tenor: 1–3 years, with option to extend subject to re-underwriting.
- Security Package: First-priority mortgage, assignment of leases, rents and insurance proceeds.
Application Process & Timeline
- Initial Assessment (Day 1–5): Provide property financials, rent roll, appraisal and sponsor credentials.
- Data Room & Review (Day 6–15): Collate lease agreements, environmental report (Phase I), title search and engineer’s report.
- Underwriting & Field Exam (Day 16–30): Site inspection, tenant interviews and stress-test model validation.
- Term Sheet (Day 31–35): Issue non-binding proposal outlining pricing, covenants and conditions precedent.
- Closing (Day 36–45): Finalize documents, perfect security, fund advance or availability.
Key Success Factors
- Accurate Valuation: Engage a reputable appraiser with local market expertise.
- Strong Documents: Clear lease files, insurance certificates and environmental sign-off.
- Transparent Sponsor Records: Up-to-date financials, credit checks and legal opinions.
- Responsive Coordination: Prompt answers to lender queries keep the timeline on track.
- Reserve Accounts: Establish tax and insurance escrows to meet lender requirements.
Engagement
Property owners seeking a customized asset-based lending solution for commercial real estate may contact FG Capital Advisors. We assess eligibility, align structures with asset profiles and guide transactions to closing within 45 days.
This information is provided for informational purposes only. It does not constitute investment advice or an offer to buy or sell any security or service. Independent professional guidance is recommended before acting on any information herein.
