Credit for a Lease

The process of getting a commercial lease can vary from landlord to landlord. One of the biggest qualifying components is the credit worthiness of the tenant. Landlords consider several factors such as tenant mix and contractual terms, business profile and long term potentnial but credit is always a key input.

Personal credit history of the owner, company balance sheet, profit and loss statements, open credit lines, and growth projections all factor in. Small business owners will be required to sign personal guarantees. In commercial leases, a solid business plan and proof of liquidity for upfront buildout expenses and operating capital goes along ways toward approval. Tenants need to show their potential income , that will cover the the landlord for the lease of the space over the term of the agreement.

Any buildout or tenant improvements required, will also factor into any credit decision the landlord will be a factor when leasing the space to the tenant. If the costs are low, with little or no tenant improvements, then landlords may be willing to take a greater risk.

Like in any relationship, putting your best foot forward is always the best path, so being ready with a available information that can be shared with a broker or owner confidentially should move forward the leasing process in a seamless fashion.

Depending on the entity applying, and whether guarantee will be needed the following is a quick list of documents that can help.

  1. Current credit report from all 3 credit reporting bureaus showing credit score on each.

  2. Current banking reference.

  3. Current Landlord reference if applicable.

  4. Current personal financial statement signed by individual.

  5. Last 2 years and YTD P&L and Balance Sheets for corporate entity signed by accountant.

  6. Last 2 years income tax returns either or both corporate entity and/or personal

  7. Current bank statements to show available cash.

  8. Business plan and budget.

  9. Anything else that will help the landlord to make an informed decision.

  10. If a corporate entity, a limited liability company, or partnership some of these will help

  • Articles of Organization/Incorporation and any amendments

  • Certificate of Filing with Certificate of Formation (incorporation) attached

  • Bylaws/regulations and any amendments

  • Certificate of good standing

  • Names of all current directors(managers)/members/partners

  • Partnership Agreement and any amendments

  • Name of general partner and all of all limited partners and their partnership interest percentages.

  • Names and titles of all current officers.