Cash Flow, Cushion, Credibility: What Commercial Real Estate Lending Requires Now

Interest rates get all the attention. They’re not what’s deciding whether your deal gets funded.

That’s the real story behind a recent episode of Your CPA’s Take on Real Estate, where James Moore CPA Daniel Roccanti breaks down a Wall Street Journal piece on big banks re-entering commercial real estate lending. The conversation moved past the headline fast and landed on something more useful: what lenders are screening for right now, and where borrowers keep tripping themselves up.

A Selective Reopening, Not a Return to Old Rules

Roccanti pushed back on the idea that banks are simply “back.” He called it “a selective reopening, not a return to the lending environment we saw several years ago.” Banks are sitting on strong capital and liquidity, and eventually capital has to get put to work. But the underwriting standards that come with that capital haven’t loosened to match.

Cash Flow, Cushion, Credibility

Ask Roccanti what lenders want to see, and he doesn’t hedge: “It’s going to be cash flow, cushion and credibility.”

Cash flow means lenders stress-testing your numbers against a conservative case, not the optimistic projection most borrowers hand over. They’ll check historical averages, current rent rolls, tenant quality, and expenses, then ask whether the deal still works if things go worse than planned.

Cushion is what happens after that. Roccanti wants to know if a sponsor has liquidity set aside for the unexpected repair or vacancy spike, rather than deploying every available dollar into the acquisition itself.

Credibility is the piece that’s easy to overlook. A strong track record, a real relationship with the lender, and accurate financial reporting can matter as much as the numbers on the page. As Roccanti put it, “people love to do business with people they like and know.”

The Financial Mistakes Roccanti Sees Most Often

Chasing the lowest interest rate tops his list, not because rate doesn’t matter, but because a slightly better rate paired with weaker proceeds, a shorter amortization schedule, or a restrictive prepayment penalty can leave you worse off overall.

Overly optimistic assumptions are the second mistake. Underestimate your vacancies. Overestimate your expenses. Lenders already assume your numbers are rosier than reality, so closing that gap builds trust instead of eroding it.

Weak bookkeeping is the third, and Roccanti doesn’t soften this one: “Good bookkeeping is worth every dollar.” Inconsistent financials can stall a deal that otherwise checks every box.

And the last one is a trap borrowers set for themselves: banking on a future rate drop to bail out a deal that doesn’t work today. “The deal needs to support under today’s financing that’s available today,” he said.

Tax Planning Has a Closing Deadline

Roccanti was direct that most of the tax strategy needs to happen before closing, not after. That includes allocating purchase price between land, building, and personal property, evaluating a cost segregation study alongside 100% bonus depreciation, and modeling business interest limitations if 35% or more of the deal involves passive investors. For anyone with multiple ownership partners, planning for a 1031 exchange also has to start well before the exit, since a “drop and swap” can take years to set up properly.

What This Means for Investors Right Now

Roccanti’s advice for anyone considering a commercial property purchase or refinance in the next 12 months comes down to a few things: start conversations with lenders early, underwrite to today’s rates and costs rather than a hoped-for future, protect liquidity, and have a real plan for what happens if the deal underperforms.

Watch the full conversation for Roccanti’s complete breakdown, including how he frames the current lending environment and what it means for deals moving forward.

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