Evaluating Creditworthiness

 

In the many strip malls  nationwide, owners might deal with one supermarket or big box store – a rated tenant – and dozens of smaller businesses that are non-rated tenants.

Although nonrated tenants such as restaurants, nail salons, boutiques, and office tenants may be creditworthy, no existing methods consistently and accurately rate these tenants. As with banking, real estate leasing does not have foolproof strategies to make credit decisions.

Despite the lack of a credible rating process to judge credit, landlords execute leases with nonrated tenants every day. In fact, these tenants make up the vast majority of commercial leasing tenants

How do you determine creditworthiness for a nonrated tenant? What factors should be considered for tenants existing under a larger parent company? Being diligent, mitigating risk, and staying solvent are key to establishing the right agreement with a nonrated tenant.

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