CRE & Lending Glossary

Commercial real estate financing comes with its own vocabulary. Here’s what the terms in our submission form actually mean.

LOI (Letter of Intent)

Non-binding offer outlining proposed price/terms before a formal contract.

AOS / PSA (Agreement/Purchase & Sale Agreement)

The binding contract to buy or sell the property.

DSCR (Debt Service Coverage Ratio)

How much net operating income covers the loan payment; most lenders require ~1.25–1.35x.

LTV (Loan-to-Value)

Loan amount as a % of the property’s value; typical CRE loans run 65–75%.

NOI (Net Operating Income)

Income left after operating expenses, before debt payments.

Term Sheet

A lender’s proposed loan terms — rate, amount, structure — issued before final approval.

Underwriting

The lender’s process of verifying financials, property condition, and risk before approving a loan.

Recourse / Non-Recourse

Whether the borrower is personally liable (recourse) or only the property secures the loan (non-recourse).

Personal Guaranty

A borrower’s personal promise to repay if the business or property can’t.

Bridge Loan

Short-term financing to bridge a gap, e.g., while stabilizing a property or awaiting permanent financing.

Permanent Loan

Long-term financing (typically 5–10+ years) once a property is stabilized.

Amortization

The schedule over which a loan is paid down.

Prepayment Penalty

A fee for paying off a loan early.

Points / Origination Fee

An upfront lender fee, expressed as a % of the loan amount.

Escrow

Funds held by a third party (often for taxes/insurance) until conditions are met.

Appraisal

A licensed valuation of the property used to confirm value for underwriting.

Phase I Environmental Site Assessment (ESA)

A report checking for environmental contamination risk.

Debt Yield

NOI divided by loan amount, a lender risk metric independent of interest rate.

Cap Rate

NOI divided by purchase price, a measure of expected return.