If your own business will occupy the building, the experience question we ask has nothing to do with real estate. It is about years in your industry, and for a standard owner-occupied business the line is three: under three years you are classified Inexperienced and capped at 70% LTV, and at three years or more you are Experienced and the program maximum LTV is back on the table.
That is the entire ladder for a standard owner-occupied business, in any industry. What makes it more complicated than a single number is everything around it — what counts as a year, whose years count, and what happens when the transaction itself represents a change: a second location, a move to a new market, or a business you have not run before. Those three cases are assessed under separate provisions, and they are where owner-occupied files actually get repriced or declined.
This page is about the general owner-occupied test. If you are financing a restaurant, bar or daycare property, the ladder is different and stricter — [that is covered here](/blog/commercial-loan-for-a-restaurant-bar-or-daycare). If your business will not occupy the building, you are on the investor track and a completely different set of tiers applies — [that is covered here](/blog/do-you-need-experience-to-qualify-for-a-commercial-real-estate-loan).
The test measures the industry, not the building
Four things in that sentence decide most files.
Ownership is one of three qualifying forms, not the only one. Ownership, operational, or employment experience all count. You do not have to have signed the front of the paychecks. Time spent running a department, managing a shop, or being employed in the trade is experience under this provision.
It has to be the same business or industry. The years have to be relevant to the business that will occupy the subject property. Nine years in freight brokerage does not establish experience for a machine shop.
"Immediately preceding the loan application" is a recency test. The experience has to run up to the application, not stop three years before it. A career you left is not the same as a career you are in.
It attaches to the Borrower or Primary Guarantor. It is a person's record, not the entity's. A newly formed holding company is normal on these files; the guarantor behind it is where the years are counted.
Where the years can have been earned
This is the question we get most often from borrowers buying their first building, and the answer surprises people.
For a standard owner-occupied business, the guideline does not require the experience to have been earned at the subject property. It does not require it to have been earned in the same city, the same state, or even at a location you still operate. It requires ownership, operational or employment experience in the same business or industry immediately preceding the application — and it is silent on where that happened.
That silence is meaningful, because the guideline is not silent everywhere. For restaurant, bar and daycare properties there is an explicit, separate rule requiring the operating business to demonstrate a minimum of three years of continuous operating history at the subject property or at another current or previous business location, and we may request documentation to verify that history. The drafters wrote the location language where they wanted it.
What the tier is actually worth
| Business type | Classification | Business experience | Maximum LTV |
|---|---|---|---|
| Standard owner-occupied business | Inexperienced | Less than 3 years | 70% |
| Standard owner-occupied business | Experienced | 3 years or more | Program maximum LTV |
| Restaurant, bar and daycare | Not eligible | Less than 3 years | N/A |
| Restaurant, bar and daycare | Inexperienced | 3 years to less than 5 years | 70% |
| Restaurant, bar and daycare | Experienced | 5 years or more | Program maximum LTV |
Two structural points about the standard row that get missed.
There is no floor. Unlike the specialty uses, a standard owner-occupied business with two years of industry experience is not ineligible — it is Inexperienced. The deal exists; it is just capped.
"Program maximum LTV" is not one number. Our core commercial parameters set the owner-occupied purchase maximum at 80% for loans with a FICO of 725 or higher, and the owner-occupied cash-out or refinance maximum at 75%. Minimum FICO is 650 and minimum Global DSC is 1.20x on both. The guideline does not state a separate purchase maximum for owner-occupied loans below a 725 FICO, so we will not invent one here — that is a pricing-matrix question for your specific file.
The second requirement stapled to the ladder
The experience provision does not end at the tier table. It carries a companion requirement that quietly disqualifies a certain kind of file.
The occupying business has to be the engine. Other verifiable, recurring income can support the file, but it cannot be the thing carrying it. If most of your qualifying income comes from a different business, from a spouse's W-2, or from a rental portfolio, and the business moving into this building is the smaller piece, the deal does not fit the owner-occupied model the way it is written — even if your industry experience is twenty years deep.
This matters most on expansions and new ventures, where the business at the subject property is by definition young and the income lives somewhere else. Hold that thought; it comes back below.
Mechanically, owner-occupied files are underwritten on Global DSC rather than property DSCR. Global annual debt service is total annual global net operating income divided by 50% of total annual personal, business and subject-property debt obligations, and the requirement is 1.20x. If a file does not reach 1.20x Global DSC under the complete or bank statement program, it may be converted to the No Doc Streamline program, which has its own requirements and its own — lower — leverage limits.
Changing industries
The test says "same business or industry." Nothing in it credits general business experience.
If you have run a successful HVAC contracting company for fifteen years and you are buying a building for a retail furniture store you are opening, the fifteen years do not transfer. You are Inexperienced in furniture retail. That is not a decline on a standard owner-occupied file — it is a 70% cap — but it is a real repricing of the deal, and it is worth knowing before you write an offer.
Two things narrow the gap in practice. Employment counts, so time spent working inside the target industry before you bought into it is on the table. And the relevance judgment is about the industry, not the exact business name — but do not stretch it. If you have to construct an argument for why two industries are the same industry, assume underwriting will reach the other conclusion.
Expansion: opening a second location
This is the most common owner-occupied change-of-circumstance file we see, and it has its own provision with three named conditions.
Take those one at a time, because each one changes what has to be in the file.
Crossing a state line is not a problem by itself. The location condition explicitly contemplates a new location in a different state. What crossing a state line does is trigger paperwork elsewhere: if the subject property sits in a state outside the borrowing entity's state, we require a foreign qualification or authorization to conduct business certificate for that state.
The existing location is the underwriting subject. Read the operational-impact condition closely: the existing location "serves as the primary source of income for approval." On an expansion, we are not underwriting the projected performance of the new site. We are underwriting whether your current, proven operation can carry the new debt without being destabilized. That is why the requirement is minimal start-up time and no undue burden — both are statements about the existing business, not the new one.
Management is a condition, not a comment. If running the second location will pull you into significant involvement, including extensive travel, then a property management agreement or an experienced management team must be established. This is written as a requirement. If you plan to personally split your week between two cities, expect to be asked who is running the original location while you are gone, and expect the answer to need a name and a role rather than a reassurance.
Expansions also get two documentation accommodations that a straight refinance does not.
Relocation: closing one location to open another
Relocation is a narrower provision than expansion, and it is written with a softer verb.
"May be approved case-by-case" means exactly that. It is not a checklist you can satisfy in advance; it is a decision. What moves it is evidence that the move does not break the business: continuity of the customer base or contracts, a realistic transition timeline, and a clear picture of what happens to revenue during the gap between closing one door and opening another.
The distinction from an expansion is worth stating plainly. In an expansion, the existing location survives and carries the approval. In a relocation, it does not survive — so the income that qualifies the loan has to be shown to travel with you.
The new-venture provision
This is the one that catches experienced, successful operators off guard.
Notice what triggers it. It is not that you lack experience. It is that you have so much of it, concentrated so tightly in yourself, that the business you already run cannot spare you.
If you are the licensed professional, the lead technician, the relationship holder, or the person whose name is the reason customers call — and the new venture will take a meaningful share of your attention — the file can be reclassified as a start-up regardless of your years in the industry. The consequence is stated in the alternative: different approval criteria, or a decline.
The practical mitigation is the same one the expansion provision names: bench depth. Someone other than you has to be able to run the original business. If that person exists, name them, describe the role, and put the structure in the file rather than leaving underwriting to infer it.
How the three paths compare
| Expansion | Relocation | New venture | |
|---|---|---|---|
| Existing location | Stays open | Closes | Stays open |
| What carries the approval | The existing location, as primary income source | Income that transfers with the move | Under review — may be treated as a start-up |
| Guideline posture | Acceptable, subject to three named conditions | Case-by-case | Different approval criteria, or declined |
| Central question | Does the new site burden the old one? | Is the operational impact minimal? | Is the owner's expertise critical where it already is? |
| Management proof needed | Yes, if owner involvement or travel is significant | Continuity of operations | Yes — who runs the original business |
Management follows you, and it can pull in the investor test
One interaction catches out-of-state expansions in particular. Our guideline requires the subject property to be managed by an experienced, reputable professional, and it can be managed by a third party or self-managed by the borrower or a borrower affiliate. But self-management has conditions: on a commercial property, a self-managing borrower or guarantor must live within 200 miles of the property and meet a minimum investor experience level.
So an owner-occupant who has never owned real estate, expanding into a building 400 miles away and planning to manage it themselves, runs into a real-estate experience requirement even though this is an owner-occupied deal. We may allow self-management regardless of property type or distance where the borrower or guarantor can verify five-plus years of investor or ownership experience with real estate of like kind, size and geographic area as the proposed collateral.
If a third-party manager is used instead, there must be an executed property management agreement with terms exceeding one year, and where the manager is an individual, a resume showing at least two-plus years of experience managing income-producing properties or relevant property management experience. That resume is not required if the individual is a confirmed licensed real estate agent or broker.
What actually trips people up
Counting from the entity formation date. The years are the guarantor's years in the industry, not the age of the LLC. A twelve-month-old holding company with a guarantor who has run the trade for a decade is an Experienced file.
Assuming general business success transfers. It does not. "Same business or industry" is the test, and a second business in a different field starts your clock over.
Treating "may be approved case-by-case" as a yes. Relocation is discretionary. Plan the deal so it survives a no.
Forgetting the income-source rule on an expansion. The occupying business has to be the primary source of qualifying income — the existing operation of that same business, not a different company you also own.
Being the indispensable person and saying so proudly. Indispensability at your current business is a risk factor when you are opening a second one. It is fine to be the expert. Have a plan for the days you are not there.
Underwriting the offer at the wrong LTV. If you are inside three years, model the deal at 70% before you sign anything.
What this page does not do
This page explains how business experience is classified on an owner-occupied file and how expansions, relocations and new ventures are assessed. It does not do the following.
It is not an approval and it is not a quote. Nothing here prices a loan, and no rate, fee or timeline is stated on this page.
It does not tell you your program maximum LTV. That is set by property type, credit program, FICO and the current pricing matrix, and our guideline notes that when one parameter approaches its threshold, others may be tightened to avoid layered risk.
It does not tell you how to document experience. The guideline sets the classification standard; the evidence that satisfies it in a specific file — resumes, licenses, prior W-2s, entity records — is a file-level conversation.
It does not cover the rest of the qualification stack. Occupancy classification, credit, Global DSC, property type eligibility, entity structure, guaranty requirements and reserves are separate gates.
It does not resolve legal, tax, zoning or permitting questions. Whether your new location is permitted for your use, and what a relocation does to your entity's tax or licensing position, belongs with your attorney, your accountant, and the municipality.
It does not fill silences. Where our guideline does not state a number — including the purchase maximum for owner-occupied loans below a 725 FICO, and any location requirement for standard owner-occupied business experience — this page does not supply one.
Guideline SBC 08/03/2026 · Reviewed August 31, 2026
Published August 31, 2026 · Updated August 31, 2026
How to use this guide
This article is educational guidance, not an offer or commitment to lend. Rules, property facts, credit, leverage, documentation, and full underwriting still control any actual scenario.