Commercial financing terms, defined.

ARV (After-Repair Value)

The appraised value of a property once planned renovation work is complete.

Lenders on fix and flip and rehab loans cap financing at a percentage of ARV, typically 65 to 75 percent, to protect their position if the project fails to finish.

Balloon Payment

A large lump-sum payment due at the end of a loan term when the amortization schedule was longer than the term itself.

Common on bank commercial loans amortized over 20 to 25 years with a 5 to 10 year term, requiring a refinance or sale before the balloon comes due.

Bridge Loan

A short-term, interest-only loan that finances a property until it qualifies for permanent financing or is sold.

Typically 12 to 36 months at 8 to 12 percent, underwritten on the borrower, the property, and a documented exit.

BRRRR

An investing strategy standing for Buy, Rehab, Rent, Refinance, Repeat.

The refinance step is a cash-out loan, usually DSCR, sized against the after-repair value to return invested cash for the next deal.

Carve-Out Guarantee

A personal guarantee on an otherwise non-recourse loan that applies only to specific bad acts.

Common triggers include fraud, misapplication of funds, environmental contamination, and unauthorized transfer or bankruptcy filing.

Cash-Out Refinance

A refinance that replaces the existing loan with a larger one and pays the borrower the difference in cash.

Typically capped at 70 to 75 percent of appraised value on investment property, with 6 to 12 months of ownership seasoning required.

CDC (Certified Development Company)

A nonprofit entity that administers the second-mortgage portion of an SBA 504 loan.

The CDC funds its debenture at project completion, locking a fixed rate for 20 or 25 years.

Certificate of Occupancy

A document issued by a local building authority confirming a building is legally habitable or usable for its intended purpose.

Construction and construction-to-permanent lenders typically require a final certificate before converting to permanent financing.

Clean URLs

A web server setting that serves a static file like apply.html at the URL /apply, without the .html extension showing.

Used on prerendered sites so crawlers and users see clean paths while the server maps them to static files.

Commitment Letter

A lender's formal, more binding agreement to fund a loan, issued after underwriting is substantially complete.

Comes after a term sheet and reflects final terms once the appraisal, title, and other conditions are resolved.

Conforming Loan

A mortgage that meets the size and underwriting standards to be sold to Fannie Mae or Freddie Mac.

Conforming investor loans cap at 10 financed properties per borrower; DSCR loans generally do not.

Construction-to-Permanent Loan

A single loan commitment that funds construction and converts to permanent financing at completion without a second closing.

Also called bridge-to-perm; saves one set of closing costs in exchange for a permanent rate set by the same lender.

Contingency

A budget line held in reserve for unplanned construction or renovation costs.

Typically 5 to 10 percent of hard costs, released only for approved overruns and reducing the loan if unused.

Coverage Ratio

See DSCR (Debt Service Coverage Ratio).

Cross-Collateralization

Using more than one property as security for a single loan.

Common on buy-before-sell bridge loans and on portfolio loans covering several properties at once.

Debenture

The bond sold to investors that funds the CDC second mortgage in an SBA 504 loan.

The debenture funds 30 to 60 days after the bank loan closes, locking the CDC portion's fixed rate at that point.

Debt Service

The total amount of principal and interest due on a loan over a given period, usually annually.

Used in the denominator of a coverage ratio: net operating income divided by annual debt service.

Delayed Financing

A refinance rule letting a cash buyer recover funds without standard seasoning, capped at their documented cash investment.

Typically available within 6 to 12 months of an all-cash purchase, capped at purchase price plus documented costs rather than the new appraised value.

Draw

A partial disbursement of loan funds released for completed and inspected construction or renovation work.

Typically funds 5 to 10 business days after the request, with a fee of $150 to $400 per draw.

DSCR (Debt Service Coverage Ratio)

A property's income divided by its debt payment, used to size and price a loan without checking the borrower's personal income.

A ratio of 1.20 or higher is typical for the best pricing; below 1.00 means the rent does not fully cover the payment.

Economic Occupancy

The actual rent collected as a percentage of total potential rent at full market rates, after discounts and delinquency.

Usually several points below physical occupancy and is what lenders use for coverage calculations.

Entitlement

The government approvals, such as zoning, subdivision maps, and site plans, that permit a specific use on a parcel of land.

Entitled land finances at higher leverage and from more lenders than raw, unentitled land.

Equity Injection

The SBA's term for the borrower's required down payment or capital contribution to a project.

Typically 10 percent for an established business, 15 to 20 percent for a startup or special-purpose property.

Escrow

A neutral third party that holds funds and documents during a real estate transaction until agreed conditions are met.

Also refers to a lender-held account collecting monthly deposits for taxes and insurance on some loans.

Extension Fee

A charge, typically 0.25 to 1 point of the balance, for extending a loan past its original maturity date.

Common on bridge, hard money, and construction loans; requested in writing before the maturity date.

FAQPage Schema

A structured-data format that marks up a list of questions and answers so search engines and AI assistants can read and cite them directly.

Used on Learn and Answers articles alongside Article schema.

FinancialService Schema

A structured-data type describing a business that offers financial services, including its service area and offerings.

Distinct from the general Organization schema; both can describe the same company for different purposes.

Gift Letter

A signed statement confirming that down payment funds from a family member or other source are a gift, not a loan to be repaid.

Required by lenders that allow gift funds toward a down payment.

Global Cash Flow

A lender's analysis of all of a borrower's income and debt combined across every business, property, and personal obligation.

Checked mainly on SBA loans, business acquisitions, and loans with a personal guarantee; not used on DSCR loans.

Guarantor

A person who signs a personal guarantee, becoming personally liable for a loan if the borrowing entity defaults and the property does not cover the shortfall.

Typically required of any owner with 20 to 25 percent or more of the borrowing entity.

Hard Money Loan

A short-term loan secured primarily by a property's equity, with light review of the borrower's income or credit.

Typically 10 to 14 percent interest with 2 to 4 points, closing in 5 to 10 business days.

IndexNow

A protocol that lets a website instantly notify search engines like Bing when pages are added, updated, or removed.

Requires a key file hosted on the site to verify ownership before submissions are accepted.

Interest Reserve

Loan funds set aside at closing and used to make the monthly interest payments during a construction or bridge term.

Sized to the construction period plus lease-up plus a cushion; itself accrues interest since it is part of the loan.

Interest-Only

A loan structure where payments cover only interest, with no reduction of the principal balance.

Standard on construction, bridge, and hard money loans; also offered as an optional period on some DSCR loans.

JSON-LD

A format for embedding structured data, such as Organization or Article schema, directly into a web page's code.

Read by search engines and AI crawlers without executing JavaScript, which is why it is injected statically at build time.

LDC

See CDC (Certified Development Company).

Lien Release

A document from a contractor or subcontractor waiving their right to place a lien on a property for work already paid.

Conditional releases are submitted with a draw request; unconditional releases confirm the prior draw's payment cleared.

LLC (Limited Liability Company)

A business entity that can hold title to real estate, separating the property's liabilities from the owner's personal assets.

Most investment and commercial loans allow or prefer LLC vesting, though owners of 20 percent or more still personally guarantee the loan.

Loan-to-Cost (LTC)

A loan amount expressed as a percentage of total project cost, meaning purchase price plus renovation or construction budget.

Typically capped at 80 to 90 percent on flip and construction loans; the loan is the lower of the LTC cap and the ARV cap.

Loan-to-Value (LTV)

A loan amount expressed as a percentage of a property's current appraised value.

Typically 65 to 80 percent depending on loan type, property, and borrower profile.

Mixed-Use Property

A building combining residential and commercial space, such as apartments over a retail storefront.

Financed as residential when the commercial share is small, and as commercial once it becomes the majority or the building has 5 or more units.

Net Operating Income (NOI)

A property's income after vacancy and operating expenses, before debt service.

The numerator in a commercial coverage ratio: NOI divided by annual debt service.

Non-Recourse Loan

A loan where the lender's remedy on default is limited to the property itself, except for specific carve-outs.

Available mainly through agency multifamily and CMBS programs, typically from about $1 million on stabilized property.

OG Image (Open Graph Image)

The image that displays when a web page is shared on social media or messaging apps.

Set via an og:image meta tag; a branded image replaces a generic or placeholder one for better link previews.

Organization Schema

A structured-data type describing a company: its name, logo, contact information, and related entities.

Often the anchor schema block that other structured data, like Person or FinancialService, links back to.

Personal Financial Statement (PFS)

A form listing an individual's assets, liabilities, and net worth, required by most commercial and SBA lenders.

Often SBA Form 413; required from every guarantor owning 20 percent or more of the borrowing entity.

Personal Guarantee

A borrower's promise to be personally liable for a loan if the borrowing entity defaults and the property does not fully cover the debt.

Standard on DSCR, bridge, hard money, and most commercial loans; waived only on qualifying non-recourse loans, subject to carve-outs.

Phase I Environmental Report

A study assessing a property for potential environmental contamination based on historical records and a site visit, without soil or water testing.

Standard on SBA and commercial construction loans; a finding triggers a more invasive Phase II report.

Physical Occupancy

The percentage of units in a property currently rented, regardless of whether rent is fully collected.

Distinct from economic occupancy, which accounts for discounts and delinquency.

Points

An upfront fee charged at closing, expressed as a percentage of the loan amount; one point equals one percent of the loan.

Typically 1 to 2 points on bridge loans and 2 to 4 points on hard money loans.

Pre-Approval

A lender's commitment based on a full review of the borrower's income and asset documentation, stronger than pre-qualification.

More common on SBA and bank loans that qualify on borrower income than on DSCR loans, which qualify on the property.

Pre-Qualification Letter

A lender's written statement that a borrower and deal are expected to qualify for financing up to a stated amount, subject to appraisal, title, and underwriting.

Used to show sellers and listing agents that a buyer has real financing behind an offer; typically issued in a few hours to a few days.

Prepayment Penalty

A fee charged for paying off a loan before its scheduled term, compensating the lender for lost interest.

Common on DSCR loans as a 3 to 5 year step-down structure, such as 5-4-3-2-1 percent of the balance.

Prerendering

Generating fully-formed HTML pages at build time so that crawlers and browsers receive complete content without running JavaScript.

Distinct from server-side rendering, which happens on each request; prerendering happens once, at deploy time.

Rate Lock

A lender's guarantee to hold a specific interest rate for a defined period, protecting the borrower from market rate movement before closing.

Ask whether a quoted rate is locked at application, at term sheet, or only at closing, since this varies by lender.

Recourse

A loan structure where the lender can pursue the borrower's personal assets, beyond the property, if a default leaves a shortfall.

Most investor and commercial loans are full recourse; the opposite is a non-recourse loan.

Replacement Reserve

A fund collected monthly on many multifamily loans to cover future capital repairs like roofs and major systems.

Typically $250 to $350 per unit per year, required by agency and many bank multifamily lenders.

Schema.org

A shared vocabulary for structured data used across the web, defining formats like Organization, Article, Person, and FAQPage.

Search engines and AI assistants use it to understand and, in some cases, directly cite page content.

Seasoning

The minimum time a borrower must own a property before a lender will use its current appraised value rather than the original purchase price.

Typically 0 to 6 months for a rate-and-term refinance and 6 to 12 months for cash-out.

Sitemap (XML Sitemap)

A file listing every indexable page on a website, submitted to search engines to help them discover and crawl content.

Located at /sitemap.xml; regenerated automatically whenever new pages are added to the site.

Spec Home

A house built to sell to an unknown future buyer, without a signed purchase contract in place during construction.

Financed with construction loans underwritten on market comps and a builder's margin rather than a buyer's qualification.

Stabilized Property

An income property that has reached sustained occupancy, typically 80 to 90 percent depending on asset type, over a meaningful period.

Permanent bank and agency loans generally require stabilization; bridge loans finance the period before it.

Structured Data

Code embedded in a web page that describes its content in a standardized format machines can parse.

Includes JSON-LD blocks like Organization, Article, and FAQPage schema.

Term Sheet

A lender's written summary of proposed loan terms, issued after an initial review, that a borrower can accept to move toward full underwriting.

Generally non-binding; distinct from and issued earlier than a commitment letter.

Underwriting

A lender's process of verifying and analyzing a borrower's and property's information to decide whether and how to approve a loan.

Ranges from a light review on DSCR loans to a multi-week process on SBA and larger commercial loans.

Value-Add

A property strategy involving renovation, releasing, or repositioning to raise income and value before a permanent refinance or sale.

Typically financed with a bridge loan during the transition, then refinanced into permanent debt once stabilized.

Yield Maintenance

A prepayment penalty formula that compensates a lender for the interest they would have earned had the loan run its full term.

Common on agency and CMBS loans; can be expensive if rates have fallen since the loan closed.