TenantBase Blog

Tenant Credit & Financial Health: What It Means for You as a Broker

A practical guide for brokers on approaching client credit conversations, what landlords actually ask for, and five real strategies for overcoming credit issues.

May 29, 2019 By TenantBase

Tenant Credit & Financial Health — Blog Header

The modern small to mid-sized business is fast-moving and self-directed in its search for commercial space — especially true within the first few years of existence, when credit and financial health may not be ideal. Servicing this kind of client well means not just meeting their budget or location criteria, but handling the hurdle that can quietly make or break a deal: the tenant's credit and financials.

Quick Answer

Ask about a client's financial position early — before you find space, not after a landlord asks. Treat the landlord like a lender evaluating a loan: they want proof the rent will get paid for the full term. If credit is genuinely weak, real options exist beyond walking away from the deal — second-generation space, tenant-funded build-out, a larger deposit, a personal guaranty, or creative proof of financial backing.

Join Our Broker Network Browse Active Tenant Deals

Brokers get matched with active tenant requirements. No cost beyond standard commission.

How to Approach It Initially

In your initial conversations, get as much information about the business as possible. How long have they been operating? Do they have existing locations? If it's a startup, ask for their business plan or a list of investors. This isn't just qualifying them — it also demonstrates your value by preparing them for the conversations they'll eventually have with landlords.

Once you have a sense of their financial preparedness, ask about their ideal space. Is their use generic enough that second-generation space would work (a standard office), or does it require substantial investment (a custom use)? If a significant build-out is likely, find out early whether they have funds allocated for it, or whether they're expecting the landlord to cover construction.

The Landlord's Perspective

Tenants are often hesitant to share financial information. A useful way to frame it: think of the landlord as a bank evaluating a loan. Would you extend a mortgage without seeing financials first? The landlord wants confidence that the money they're effectively lending — the space, the improvements, the term — will be recouped through rent for the duration of the lease.

What Landlords Typically Ask For

For an individual or guarantor

Last two years of tax returns
Current checking, savings, and other liquid account balances
Larger landlords often use a detailed tenant application covering assets and liabilities

For a company

Profit and loss statement for the last two years
Balance sheet, and potentially tax returns
Larger, public, or investor-backed companies typically provide audited financials

Overcoming Credit Issues

Target second-generation space. Find space the tenant can take as-is. This limits liability for the landlord — especially smaller landlords who mainly want the space leased — though it's a harder sell with more institutional landlords like REITs.

Have the tenant pay for build-out. If the tenant has capital to invest, raise it with the landlord directly. Either way, the landlord ends up with a renovated, more easily re-leasable space if the tenant eventually leaves.

Offer an increased deposit or prepaid rent. Gives the landlord more guaranteed income upfront. If there's additional security deposit, negotiate for it to burn off toward rent later in the term if the tenant stays in good standing.

Secure a personal guaranty. For a newly established company, a principal's personal guaranty helps — try to limit its scope to what's reasonable given the landlord's actual investment (a year or two if minimal work, the full initial term if substantial build-out is involved).

Get creative with financial backing. A new business with a founder who has a decade of relevant industry success, an active funding round with investors or VCs, an available line of credit, or liquid investment accounts (401(k)s, CDs, stock) can all help make the case for financial viability.

Your job isn't just finding space for a client — it's helping them through the entire process, especially if this is their first lease or a new venture. The more information you gather upfront, the better positioned you are to help the landlord see your client as a viable long-term tenant.

Looking for more ways to strengthen how you serve clients and grow your business? See Brokerages Embracing PropTech to Bridge the Digital Divide and How Brokers Can Get Digital in a Hurry.

Serve Clients With a Platform Built to Support You

Join TenantBase's broker network and get matched with tenants who are ready to move — no separate software fee.

Join Our Broker Network

Frequently Asked Questions

What financial documents do landlords typically ask for from a tenant?

For an individual or guarantor, typically the last two years of tax returns and current liquid account balances. For a company, a profit and loss statement for the last two years, a balance sheet, and potentially tax returns — larger or public companies will usually have audited financials.

How should a broker approach asking a client for financial information?

Frame it the way a landlord will: as a lender evaluating whether they'll get their money back. Ask early in the relationship — how long the business has operated, whether they have existing locations, and for a startup, their business plan or investor list. This both qualifies the client and prepares them for the landlord conversation ahead.

What can a broker do if a tenant has weak credit?

Several real options exist: targeting second-generation space that limits landlord risk, having the tenant fund their own build-out, offering an increased deposit or prepaid rent, securing a personal guaranty from a principal, or finding creative ways to demonstrate financial backing, such as an active funding round or a line of credit.