ANSWER: A Pre-approval differs from Pre-qualification in commercial lending in that the “Pre-approval” or Term Sheet/Letter of Interest is issued after a preliminary underwriting determination has been made. The buyer’s qualifications and the data from the commercial property are combined to assess the risks versus the merits of the loan application.

Ratio (DSCR) will comply with general underwriting guidelines after items such as depreciation, officer’s salaries, mortgage interest, and certain non-re-occurring expenses are added back to the net profit/loss. A Pre-approval will have been issued conditioned upon certain events, and due diligence has been completed.