Can You Refinance Commercial Property with Bad Credit?
Yes, you can refinance commercial property with bad credit, though your options shift from conventional banks to alternative lending channels. If your credit score sits below 650, traditional lenders will likely decline your application. But if you need to refinance commercial property bad credit should not stop you, because the commercial lending market is broader than most borrowers realize. Hard money lenders, private money funds, bridge loan providers, and portfolio lenders all work with borrowers who have imperfect credit.
The key difference when you refinance commercial property with bad credit is that lenders place far more emphasis on the property itself. A strong rent roll, healthy debt service coverage ratio, and solid equity position can offset a low personal credit score. Many alternative lenders underwrite primarily to the asset rather than the borrower.
Bad credit refinancing comes with tradeoffs: interest rates run 3 to 6 percentage points higher, loan terms are shorter, and origination fees are higher. The goal is to use these short-term solutions as a bridge while rebuilding credit for a future refinance into better terms.
Whether you are dealing with a prior foreclosure, bankruptcy, tax liens, or simply a thin credit file, there are pathways to refinance your commercial property. This guide walks through every option available in 2026, what each one costs, and how to position yourself for approval.
What Credit Score Do You Need to Refinance a Commercial Property?
The minimum credit score depends entirely on the lender type you approach. Hard money lenders and private money lenders will consider borrowers with scores as low as 500 to 550, while conventional banks require 660 to 680 or higher.
Here is how credit requirements break down in 2026:
Conventional and Agency Lenders (680+): CMBS conduit lenders, Fannie Mae, Freddie Mac, and most regional banks offer the lowest rates but have the strictest credit requirements.
SBA Lenders (650+): The Small Business Administration 504 and 7(a) refinance programs accept credit scores down to 650 for owner-occupied commercial properties. SBA refinancing offers up to 90% loan-to-value and 25-year amortization, though some lenders have internal minimums of 680.
Credit Union Portfolio Lenders (640+): Certain credit unions hold commercial loans on their balance sheet, giving them flexibility to approve borrowers with mid-range credit scores at competitive rates.
Bridge Loan Lenders (600+): Bridge loans serve as short-term solutions (12 to 36 months), focusing on property performance and exit strategy.
Hard Money and Private Money (500 to 580+): Hard money lenders underwrite primarily to collateral value, sometimes with no minimum credit score. Private money lenders operate similarly, funded by individual investors or family offices.
Even when a lender has a low minimum score, a higher score within their range gets you better terms.
What Refinance Options Exist for Borrowers with Bad Credit?
Several distinct refinance pathways exist for borrowers with credit challenges. The right choice depends on your property type, equity position, timeline, and long-term goals.
Hard Money Refinance
Hard money refinancing is the most accessible option for borrowers with bad credit. These loans are asset-based, meaning the lender underwrites primarily to the property value rather than your personal creditworthiness. Typical terms include:
- Interest rates from 10.00% to 14.00%
- Loan-to-value up to 65%
- Terms of 6 to 36 months
- Origination fees of 2 to 4 points
- Closing timeline of 7 to 14 days
Hard money refinances work best as short-term solutions to pay off a maturing loan or buy time while improving your credit. Always include a clear exit strategy.
Private Money Refinance
Private money lenders operate similarly to hard money but are typically funded by high-net-worth individuals or family offices rather than institutional capital. This can result in more flexible terms and slightly lower rates:
- Interest rates from 9.50% to 13.50%
- Loan-to-value up to 70%
- Terms of 12 to 60 months
- Origination fees of 1 to 3 points
- Closing timeline of 10 to 21 days
Private money is particularly useful when your situation does not fit neatly into standard lender criteria. A private lender can evaluate your deal holistically and structure flexible terms.
Bridge Loan Refinance
Bridge loans are short-term commercial loans designed to bridge the gap between your current situation and a long-term solution. For bad credit borrowers, a bridge refinance provides:
- Interest rates from 8.50% to 12.00%
- Loan-to-value up to 75%
- Terms of 12 to 36 months
- Origination fees of 1 to 2 points
- Closing timeline of 14 to 30 days
Bridge lenders typically require a credit score of 600 or above but focus on the property's income and your exit strategy. Strong cash flow and a viable path to permanent financing earn better rates than hard money.
DSCR-Based Refinance Programs
Debt service coverage ratio (DSCR) loans represent another path for bad credit borrowers. These programs underwrite almost exclusively to the property's income, making your personal credit score a secondary consideration. Use our DSCR Calculator to see if your property qualifies.
DSCR lenders typically want to see a ratio of 1.20x or higher, meaning the property's net operating income is at least 120% of the proposed debt service. If your property clears that threshold, some DSCR lenders will approve borrowers with credit scores as low as 580.
How Much More Does Bad Credit Cost You on a Commercial Refinance?
Bad credit can cost tens of thousands to hundreds of thousands of dollars more over the life of a loan. The primary cost driver is a higher interest rate: for every 50 points below 700, expect 1.5 to 2.5 extra percentage points. On a $1 million loan, that is $15,000 to $25,000 in extra annual interest.
Beyond interest rates, bad credit increases costs in several other ways:
Higher Origination Fees: Conventional lenders charge 0.50% to 1.00% in origination fees. Hard money and private lenders charge 2.00% to 4.00%. On a $1 million refinance, that is an extra $10,000 to $30,000 at closing.
Lower Loan-to-Value Limits: Bad credit lenders cap LTV at 60% to 70%, compared to 75% to 80% for conventional loans. This means you need more equity in the property and may not be able to pull out as much cash.
Shorter Loan Terms: Instead of 5 to 10 year terms with 25 to 30 year amortization, bad credit loans typically run 1 to 3 years. This means more frequent refinances and additional closing costs.
Prepayment Penalties: Some alternative lenders include prepayment penalties of 1% to 3%, which adds costs if you refinance out early as your credit improves.
Run the numbers on your specific scenario using our Commercial Mortgage Calculator to see exactly how rate differences impact your monthly payments and total costs.
What Do Lenders Look at Besides Credit Score?
Property cash flow and asset quality matter more than your credit score in most commercial refinance evaluations. Your credit score is just one piece of a larger underwriting puzzle.
Debt Service Coverage Ratio (DSCR): This is the single most important metric. Lenders want to see that the property generates enough income to comfortably cover the proposed loan payments. A DSCR of 1.25x or higher significantly improves your approval odds, even with bad credit. Calculate your property's DSCR with our DSCR Calculator.
Loan-to-Value Ratio: The more equity you have in the property, the less risk for the lender. If you are refinancing at 60% LTV, many alternative lenders will overlook credit issues because they have a substantial equity cushion protecting their investment.
Property Condition and Location: Well-maintained properties in strong markets with low vacancy rates present less risk. A Class A multifamily property in a growing metro area will get better terms than a dated strip mall in a declining market.
Borrower Experience: Lenders view experienced operators as lower risk. Your track record managing commercial properties speaks louder than your credit score. If you are newer to commercial real estate, review our guide on how to get a commercial loan with no experience.
Cash Reserves and Liquidity: Showing 6 to 12 months of debt service in reserve accounts demonstrates your ability to weather vacancy or unexpected expenses.
Credit Explanation: A written letter explaining the circumstances behind your credit issues makes a meaningful difference. Lenders distinguish between one-time hardships and patterns of financial mismanagement.
What Are the Most Common Reasons for Bad Credit Among Commercial Borrowers?
Late payments on existing loans represent the most common credit issue, affecting roughly 25% of bad credit commercial borrowers.
Late Payments (25%): Occasional 30-day lates are viewed more leniently than 60 or 90-day delinquencies. If late payments are older than 24 months with a clean record since, many alternative lenders will work with you.
Previous Foreclosure or Short Sale (22%): A foreclosure typically drops scores by 100 to 150 points. Conventional lenders require a 3 to 7 year waiting period, but hard money lenders and private money lenders will consider borrowers within 12 months.
Business Bankruptcy (18%): Chapter 7 or Chapter 11 bankruptcy shows on your credit for 7 to 10 years. Many alternative lenders will consider borrowers 2 to 3 years post-discharge, provided the underlying business issues have been resolved.
High Credit Utilization (15%): Carrying balances above 30% of available credit drags down your score significantly. This is the easiest problem to fix, as paying down balances can boost your score by 30 to 50 points within one to two billing cycles.
Tax Liens or Judgments (12%): Unresolved tax liens are a red flag for all lenders. However, showing a payment plan with the IRS or state tax authority allows some alternative lenders to proceed.
Limited Credit History (8%): Foreign nationals and borrowers who have operated primarily in cash may lack credit history altogether. Some lenders offer no-credit-score programs that underwrite purely to the property.
How Can You Improve Your Credit Before Refinancing?
Start by disputing errors on your credit reports, which can yield 20 to 50 points within 30 to 60 days. A strategic approach can move your score meaningfully higher within 3 to 12 months.
Here is a proven credit improvement roadmap for commercial borrowers:
Step 1: Pull All Three Credit Reports. Request reports from Equifax, Experian, and TransUnion through AnnualCreditReport.com. Review each for errors, including incorrect late payments and accounts that do not belong to you.
Step 2: Dispute Inaccurate Items. File disputes directly with each bureau. Under the Fair Credit Reporting Act, bureaus must investigate within 30 days. Common errors include payments reported late that were on time and duplicate accounts.
Step 3: Pay Down Revolving Balances. Credit utilization accounts for roughly 30% of your FICO score. Paying balances to below 30% of your limit can produce significant improvements within one to two billing cycles.
Step 4: Negotiate Pay-for-Delete Agreements. For collection accounts, offer to pay in full in exchange for removing the negative mark. Get any agreement in writing before making payment.
Step 5: Establish Positive Credit Lines. If your credit file is thin, consider a secured credit card or credit-builder loan. On-time payments build positive history that gradually improves your score.
Step 6: Avoid New Hard Inquiries. Each inquiry can drop your score by 5 to 10 points. Keep all lender inquiries within a 14 to 45 day window so they count as a single inquiry.
Some borrowers see 50+ point gains within 3 months through disputes and utilization reduction. Others need 6 to 12 months to move from the low 500s into the mid-600s where more options open up.
What Documents Do You Need for a Bad Credit Commercial Refinance?
Thorough documentation is one of the most effective ways to offset concerns about your credit history. Lenders who work with impaired credit borrowers place even greater emphasis on documentation quality.
Here is your complete documentation checklist:
Property Documents:
- Current appraisal (within 6 months, ordered by lender)
- Rent roll showing all tenants, lease terms, and rental rates
- 12 to 24 months of operating statements (T-12 preferred)
- Copies of all leases or lease abstracts
- Property insurance declarations page
- Environmental Phase I report (for properties over $1 million)
Borrower Documents:
- Personal financial statement
- 3 to 6 months of bank statements
- 2 to 3 years of personal and business tax returns
- Credit explanation letter detailing circumstances behind negative items
- Entity documents (operating agreement, articles of incorporation)
- Schedule of real estate owned
Refinance-Specific Documents:
- Current loan payoff statement
- Loan history showing payment performance
- Exit strategy memo (for short-term bridge or hard money loans)
The credit explanation letter deserves special attention. Be specific about what happened, when it occurred, what you have done to address it, and why the situation will not repeat.
For guidance on how much equity you will need, review our article on commercial loan down payment requirements.
What Is the Best Strategy for Refinancing with Bad Credit in 2026?
The best strategy combines short-term alternative financing with an aggressive credit repair plan. Refinance now, then again in 12 to 24 months at better terms.
Phase 1: Secure Alternative Financing (Months 1 to 3)
Your immediate goal is to close a refinance that addresses your current need. Based on your credit profile:
- Credit score 600 to 649: Start with bridge loan lenders for the best balance of terms and accessibility
- Credit score 550 to 599: Target hard money lenders or private money lenders
- Credit score below 550: Focus exclusively on hard money or asset-based private lenders
Shop at least 3 to 5 lenders. The difference of 1 to 2 percentage points on a $1 million loan saves $10,000 to $20,000 per year.
Phase 2: Credit Rehabilitation and Conventional Refinance (Months 3 to 24)
While your alternative loan is in place, execute an aggressive credit repair strategy: dispute all errors, pay down revolving balances below 30%, make every payment on time, and resolve outstanding tax liens. Target 650+ within 12 months or 680+ within 24 months to access conventional rates that are 3 to 5 percentage points lower.
Ready to explore your refinance options? Contact Clear House Lending for a free consultation. Our team specializes in finding solutions for borrowers with challenging credit profiles, and we work with a network of over 100 lenders to find the right fit for your situation.
What Are the Most Frequently Asked Questions About Bad Credit Commercial Refinancing?
Can I refinance a commercial property with a credit score under 600? Yes. Hard money and private money lenders regularly work with borrowers in the 500 to 599 range, focusing on property value and income. Expect rates of 10% to 14% and LTV limits of 60% to 65%.
How long after a bankruptcy can I refinance a commercial property? Hard money and private money lenders may work with borrowers as soon as 12 months after discharge. Banks typically require 3 to 7 years. SBA lenders require 3 years post-discharge.
Will a commercial refinance hurt my credit score? The initial inquiry may lower your score by 5 to 10 points temporarily. However, if the refinance eliminates late payments on your current loan, the long-term effect can be positive. On-time payments on the new loan build positive history.
Can I do a cash-out refinance with bad credit? Yes, though it requires more equity. Most hard money lenders cap cash-out refinances at 60% to 65% LTV, compared to 70% to 75% for good credit borrowers. The property must demonstrate strong cash flow.
What is the fastest way to refinance a commercial property with bad credit? Hard money refinancing is the fastest option, with closings possible in 7 to 14 days. Have your documentation package complete before applying. Contact us for expedited processing.
Should I wait to improve my credit before refinancing? If your loan is maturing or terms are unsustainable, refinance now with alternative financing. If your current loan is stable and you have 6 to 12 months, waiting to improve credit can save significant money. Use our Commercial Mortgage Calculator to compare scenarios.
Do I need a down payment to refinance with bad credit? Refinancing does not require a down payment, but you need equity. Most bad credit lenders require 30% to 40% equity (60% to 70% LTV). Learn more in our guide on commercial loan down payment requirements.
Can a co-signer help me refinance with bad credit? Yes. Adding a guarantor with strong credit can significantly improve your terms and expand your lender options. The co-signer takes on personal liability, and some lenders will use the higher of the two credit scores for qualification.
Are You Ready to Refinance Your Commercial Property?
Bad credit does not have to keep you locked into unfavorable terms or force you into losing a property when a loan matures. The commercial lending market offers multiple pathways, from hard money refinancing to bridge loans and DSCR-based programs.
The most successful borrowers take a two-phase approach: secure alternative financing now, then rebuild credit to refinance into conventional terms within 12 to 24 months.
Contact Clear House Lending today to discuss your situation. Our team has helped hundreds of borrowers with credit challenges find the right refinance solution.
Where Can You Find More Information on Commercial Refinancing?
- Federal Reserve Economic Data (FRED), Commercial Real Estate Lending Trends, 2025-2026
- Mortgage Bankers Association, Commercial/Multifamily Mortgage Origination Index, Q4 2025
- National Association of Realtors, Commercial Real Estate Lending Survey, 2025
- Consumer Financial Protection Bureau, Credit Score Requirements for Commercial Loans, 2025
- Small Business Administration, SBA 504 and 7(a) Refinance Program Guidelines, 2025-2026
- Fair Credit Reporting Act (FCRA), Bureau Dispute and Resolution Requirements
- FICO, Understanding Credit Score Factors and Improvement Strategies, 2025