Understand the language of commercial real estate, DSCR loans, SBA financing, business lines of credit, and equipment financing.
146 terms & acronyms, explained in plain English
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These examples illustrate how lenders commonly apply three core ratios. Lender definitions, underwriting methods, program requirements, and terms may differ — some programs calculate these figures differently or apply additional tests.
DSCR = $120,000 ÷ $100,000 = 1.20
A DSCR of 1.20 means the property generates $1.20 in net operating income for every $1.00 of annual debt service. For residential 1–4 unit investment properties, many DSCR programs instead divide gross monthly rent by the monthly PITIA payment.
LTV = $700,000 ÷ $1,000,000 = 70%
LTV measures leverage against value. For purchases, lenders typically use the lower of the purchase price or appraised value.
Cap Rate = $80,000 ÷ $1,000,000 = 8%
Cap rate estimates the unlevered annual return of a property. It does not account for loan payments, so it is best used to compare properties rather than to measure cash flow.
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Explore Your Financing OptionsInformation is provided for educational purposes only. Loan programs, terms, rates, and eligibility vary by lender and are subject to underwriting and approval. Nothing on this page constitutes a loan approval, offer, or commitment to lend.