Plain English
Commercial Lending Glossary
The terms we use, decoded. Start with sponsor, the borrower who owns the deal and brings the equity, then the ratios and structures lenders care about most.
Looking for a fast one line definition instead? The quick reference glossary covers a wider set of terms in a single scannable list.
- Sponsor
- The person or company that owns and drives a commercial deal, the borrower who puts up the equity, signs on the loan, and executes the business plan. Lenders underwrite the sponsor as much as the property. Full definition →
- Sponsor Equity
- The sponsor’s own cash in the deal, their skin in the game. Lenders expect the sponsor to bring this; PeerSense places the debt on top of it. We do not raise it for you. Full definition →
- LTV (Loan-to-Value)
- The loan amount as a percentage of the property’s value. Lower LTV means more sponsor equity and an easier approval at better pricing. Full definition →
- DSCR (Debt-Service-Coverage Ratio)
- Net operating income ÷ annual loan payments. Most lenders want 1.25x or higher, the property earns 25% more than the debt costs. Full definition →
- Debt Yield
- Net operating income ÷ loan amount. A lender’s downside cushion that holds up regardless of interest rate or appraised value. Full definition →
- Interest Reserve
- Loan funds set aside to cover interest during construction or lease-up, before the property produces enough cash flow to pay it. Full definition →
- Value-Add Property
- An asset bought specifically to improve, renovate, re-lease, or reposition, to raise its income and value. Full definition →
- Stabilized Property
- A fully-leased property with steady, proven income. The easiest profile to finance and the one that earns the lowest rates. Full definition →
- Credit Box
- A lender’s specific rules, loan size, LTV, geography, asset type, credit, that define exactly what they will and won’t approve. PeerSense matches your deal to lenders whose box already fits. Full definition →
- C-PACE Loan
- Long-term, fixed-rate financing for energy, water, and resilience improvements, repaid through a special assessment on the property tax bill. Full definition →
- Recourse vs. Non-Recourse
- Recourse means the sponsor personally guarantees the loan; non-recourse limits the lender to the property itself (with standard “bad-boy” carve-outs). Full definition →
- Bridge Loan
- Short-term debt (often 12–36 months) that closes fast to acquire or reposition a property, then is refinanced into permanent debt once stabilized. Full definition →
- Loan to Cost, LTC
- The loan as a percentage of the total cost to build or buy, including land, hard costs, soft costs and interest reserve. Construction lenders size to cost because a finished value does not exist yet. Full definition →
- Loan to After Repair Value, LTARV
- The loan as a percentage of what a property will be worth once the planned work is finished. Leverage against a future value, which makes it the most easily misread of the three leverage ratios. Full definition →
- Advance Rate
- In factoring, the share of an invoice paid up front, with the balance released on collection net of the fee. It is not leverage and never comparable to an LTV. A high advance rate says nothing about cost. Full definition →
- Spread and Index
- Floating pricing is a published index such as SOFR plus a fixed spread in basis points. A headline from rate on a marketing sheet is usually a fixed teaser that does not describe a floating deal. Full definition →
- Interest Only and Amortization
- Interest only repays no principal; amortizing payments repay both. The schedule drives the payment and the payment drives the coverage test, so an interest only period flatters coverage. Full definition →
- SBA 504 and 7a
- Two SBA programmes. 504 funds owner occupied real estate and heavy equipment through a bank first mortgage plus a development company debenture. 7a is the general purpose loan, covering working capital and acquisitions. Full definition →
- Take Out Financing
- The permanent debt, or the sale, that repays a bridge or construction loan at maturity. An exit that was assumed rather than proven is what actually kills bridge deals. Full definition →
- Cap Rate
- Net operating income divided by property value, expressed as a percentage. A valuation measure used by buyers and sellers, not a lending test. Different denominator from debt yield, which divides income by the loan amount.
- NOI, Net Operating Income
- Income from a property after operating expenses but before debt service, capital expenditure and tax. Lenders underwrite their own version, deducting vacancy, reserves and a market management fee, and it is usually lower than the seller’s.
- Seasoning
- How long something has existed before a lender will rely on it: months of ownership before a cash out refinance, months of payment history on a loan, or months of income at the current level before it counts as stabilized.
- Owner Occupied
- Property the operating business itself uses rather than rents out. SBA financing requires the business to occupy at least 51 percent of an existing building, or at least 60 percent on new construction. Full definition →
- Conduit / CMBS
- Fixed rate commercial mortgages originated to be pooled and sold to bond investors rather than held on a balance sheet. Typically non recourse subject to carve outs, with tight structure and limited flexibility to restructure later. Full definition →
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