Know the Terms.
See the Bigger Picture.

Capital used to purchase a business, property or other asset.

Why it matters: The mix of debt and equity determines funding needs and repayment obligations.

Example: A buyer combines senior debt, seller financing and equity to buy a company.

Repaying loan principal through scheduled installments over a defined period.

Why it matters: A longer amortization usually lowers payments but leaves more principal outstanding at an earlier maturity.

Example: A 30-year amortization on a 10-year loan usually leaves a balloon after year ten.

Principal remaining after the last scheduled installment that becomes due at contractual maturity.

Why it matters: A lower monthly payment may leave a larger amount to refinance or repay.

Example: A $1 million remaining balance is a $1 million balloon, separate from the final installment.

One hundredth of one percentage point.

100 bps = 1 percentage point

Why it matters: Rate spreads and changes are often quoted in basis points.

Example: A rise of 25 bps moves 6.50% to 6.75%.

Shorter-term financing used to span an acquisition, repositioning or other transition.

Why it matters: The borrower needs a realistic repayment or refinancing plan.

Example: An owner uses a two-year bridge loan while renovating a partially vacant building.

The layers of debt and equity funding a transaction, ordered by contractual priority and risk.

Why it matters: Each layer changes cash-flow claims, flexibility and downside exposure.

Example: A $10 million project uses $6 million senior debt, $1 million preferred equity and $3 million common equity.

Annual NOI relative to property value or price, expressed as a percentage.

Cap rate = NOI ÷ Property value × 100

Why it matters: It is an income-to-value measure, not a guaranteed investment return.

Example: $225,000 NOI on a $2.5 million price implies a 9% cap rate.

Financing underwritten principally around a business's expected ability to generate cash for repayment.

Why it matters: Sustainable earnings and leverage matter even when collateral is limited.

Example: A lender evaluates recurring operating earnings to size acquisition debt.

Contractual arrangements controlling the collection and distribution of property cash receipts.

Why it matters: Triggers may redirect cash before it reaches the owner.

Example: Rents flow to a controlled account and are applied through an agreed payment waterfall.

Assets pledged to secure obligations and available for recovery under the agreement and applicable law.

Why it matters: Collateral value alone does not establish repayment capacity.

Example: A lender takes a mortgage on a warehouse and a lien on specified equipment.

A loan secured by income-producing or business-use real estate.

Why it matters: Terms depend on the property, borrower and lender rather than a universal consumer-loan standard.

Example: A warehouse owner borrows against the building to finance an acquisition.

Ownership capital generally bearing residual upside and downside after higher-priority claims.

Why it matters: Distributions are contingent on performance and the agreed waterfall.

Example: A sponsor's common equity receives proceeds after debt and preferred claims.

Financing typically advanced in draws as approved construction work progresses.

Why it matters: Draw conditions, budget controls and completion risks affect available funding.

Example: A lender releases funds after reviewing completed foundation work.

Scheduled principal and interest payments for a stated period.

Why it matters: Actual cash flows matter when a year includes both interest-only and amortizing months.

Example: Twelve $10,000 installments equal $120,000 annual debt service; a separate balloon is not recurring debt service.

Funds set aside to cover specified future debt payments.

Why it matters: A reserve is a cash requirement separate from regular loan installments.

Example: Six months of $10,000 payments requires a $60,000 reserve.

Annual property NOI expressed as a percentage of loan principal.

Debt yield = NOI ÷ Loan amount × 100

Why it matters: It measures income relative to debt without depending directly on interest rate or amortization.

Example: $200,000 NOI on a $2 million loan gives a 10% debt yield.

Annual operating income divided by the annual debt payments being measured.

DSCR = NOI ÷ Annual debt service

Why it matters: It compares income with payment obligations; lender adjustments and requirements vary.

Example: $150,000 NOI divided by $120,000 debt service is 1.25x.

Replacing real estate collateral with qualifying securities whose cash flows support remaining loan obligations.

Why it matters: This can release a property lien but entails legal, servicing and securities costs.

Example: An owner purchases an approved securities portfolio to facilitate a sale.

Upfront amounts generally paid to obtain a different interest-rate pricing arrangement.

Why it matters: The benefit depends on rate savings, holding period and lender terms.

Example: One point on a $1 million loan costs $10,000.

Earnings before interest, taxes, depreciation and amortization.

Why it matters: It is not the same as cash available after capital expenditures, working capital and debt service.

Example: $500,000 net income plus $100,000 interest, $80,000 taxes and $120,000 D&A yields $800,000 EBITDA.

A measure of operating-business value across capital providers, often expressed as equity value plus debt less cash, with deal-specific adjustments.

Why it matters: Headline enterprise value differs from the seller's equity proceeds.

Example: $4 million equity value plus $1 million debt less $200,000 cash gives $4.8 million EV.

Capital invested by owners or investors rather than borrowed under the modeled loan.

Why it matters: Required cash may also include fees, reserves and other transaction costs.

Example: A $2.5 million acquisition with $1.75 million debt requires $750,000 equity before fees.

A loan whose interest rate stays unchanged for the specified fixed-rate period.

Why it matters: A fixed rate improves payment predictability but does not eliminate maturity or refinancing risk.

Example: A 6% rate fixed for five years stays 6% during that period.

A loan with an interest rate that resets using a reference index plus a contractual spread.

Why it matters: Payments may increase when the index rises, subject to any cap or floor.

Example: SOFR of 4% plus a 3% spread produces a 7% rate before any floor.

The margin added to a benchmark rate under a loan agreement.

Why it matters: The spread is only part of an all-in floating rate.

Example: A 4% index plus a 250-bps spread produces 6.5% before floors.

A structure in which scheduled payments cover interest without reducing principal during a specified period.

Monthly interest = Principal × Annual rate ÷ 12

Why it matters: Initial debt service is lower, but principal remains outstanding and payments may rise later.

Example: $1 million at 6% requires $5,000 monthly during interest-only.

Annual scheduled debt service divided by initial loan principal for a specified structure.

Loan constant = Annual debt service ÷ Initial principal × 100

Why it matters: It helps compare payment burdens across rates and amortization periods.

Example: $80,000 annual debt service on $1 million of principal is an 8% constant.

The contractual date when the loan must be fully repaid.

Why it matters: Maturity can arrive before the amortization schedule pays off principal.

Example: A five-year maturity can coexist with 25-year amortization.

A fee charged for originating a loan, often stated as a percentage of principal.

Why it matters: It adds to financing costs but is not principal repayment or recurring debt service.

Example: A 1% fee on $1.75 million equals $17,500.

An arrangement in which another institution takes an economic interest in a loan originated or administered by a lead lender.

Why it matters: Servicing, control and risk allocation depend on the participation agreement.

Example: A bank retains half a commercial loan and sells a participation in the other half.

Loan principal relative to the eligible total cost of a project.

LTC = Loan amount ÷ Eligible project cost × 100

Why it matters: Cost and market value are different denominators; lender definitions of eligible cost vary.

Example: A $7 million loan on a $10 million eligible project budget is 70% LTC.

Loan principal relative to the entered or appraised property value.

LTV = Loan amount ÷ Property value × 100

Why it matters: Value changes can affect leverage even when loan principal stays constant.

Example: A $1.4 million loan on a $2 million property equals 70% LTV.

Financing positioned between senior debt and equity, often secured by ownership interests rather than a direct real-estate mortgage.

Why it matters: It adds leverage and cost, with rights governed by intercreditor terms.

Example: A sponsor layers mezzanine financing behind a first mortgage.

Property revenue less operating expenses, before financing payments and income taxes; capital expenditures are generally excluded.

NOI = Operating revenue − Operating expenses

Why it matters: Underwritten NOI may differ from a seller's reported cash flow.

Example: $400,000 revenue less $175,000 operating expenses produces $225,000 NOI.

Debt generally limiting recovery to collateral, with negotiated exceptions and carve-outs.

Why it matters: Non-recourse does not mean no liability in every circumstance.

Example: Fraud or prohibited transfers may trigger carve-out liability.

Longer-term financing generally intended for a completed, income-producing property.

Why it matters: It may replace short-term construction or bridge debt once a property stabilizes.

Example: A leased apartment project replaces its construction loan with a ten-year mortgage.

An individual's contractual promise to satisfy specified loan obligations.

Why it matters: Scope can be full, limited or conditional and requires careful review.

Example: A guaranty may cover 25% of principal or only completion obligations.

Equity with negotiated distribution or return priority over common equity.

Why it matters: Preferred returns and redemption rights depend on documents and are not guarantees.

Example: Preferred investors receive an agreed priority distribution before common owners.

A charge that may apply when debt is repaid ahead of specified dates or conditions.

Why it matters: It can affect the economics of a sale or refinance.

Example: A 2% penalty on a $1 million eligible payoff balance is $20,000.

A bank reference lending rate used to price some variable-rate credit.

Why it matters: Prime is an index, not a promised rate for an individual borrower.

Example: Prime plus 1% produces 8% when the applicable prime rate is 7%.

A contractual ceiling or purchased hedge that limits exposure to a specified floating benchmark.

Why it matters: A hedge can have separate premiums, expiration and coverage terms.

Example: A SOFR cap at 5% does not necessarily cap the loan's all-in rate at 5%.

A contractual minimum for an index or all-in interest rate.

Why it matters: A falling benchmark may not reduce payments below the agreed minimum.

Example: A 3% index floor applies even if the actual index falls to 2%.

Debt that allows lender recovery against specified borrower or guarantor assets beyond the collateral, subject to contract and law.

Why it matters: It affects personal or entity exposure if collateral proceeds fall short.

Example: A guarantor may remain liable for a deficiency under a recourse agreement.

Replacing existing debt with a new loan, sometimes with a different balance or structure.

Why it matters: New debt may change costs and risks; fees and payoff amounts affect proceeds.

Example: A $1.75 million new loan pays off $1.6 million, leaving $150,000 before fees.

A tenant-by-tenant schedule of occupied space, rent and lease information.

Why it matters: Lease expirations, arrears and tenant concentration can change financing risk.

Example: A rent roll lists each tenant's monthly rent and lease end date.

A program generally combining lender and Certified Development Company financing for eligible long-term fixed assets.

Why it matters: It is not general-purpose financing for every business acquisition or working-capital need.

Example: An eligible business finances an owner-occupied facility with a bank loan and CDC financing.

A participating-lender loan under the SBA 7(a) guaranty program, potentially supporting eligible business acquisitions and other uses.

Why it matters: Eligibility, use of proceeds and lender underwriting still apply; an SBA guaranty protects the lender, not the borrower from repayment.

Example: An eligible buyer uses 7(a) financing for a business acquisition and working capital.

Financing supplied by the seller, usually through a note payable by the buyer.

Why it matters: Payment timing, security and subordination must work with other capital sources.

Example: A seller accepts $200,000 of the purchase price through a five-year note.

Debt with priority over specified junior claims in an agreed capital structure.

Why it matters: Priority influences risk and recovery, but does not guarantee repayment.

Example: A first-mortgage lender is paid before subordinate debt from eligible collateral proceeds.

The Secured Overnight Financing Rate, based on overnight borrowing secured by U.S. Treasury securities.

Why it matters: Loan contracts specify which SOFR convention and reset timing apply.

Example: A loan may reference one-month Term SOFR plus 275 bps.

An estimate of operating income once a property reaches an assumed sustainable occupancy and expense level.

Why it matters: Projected stabilization is an assumption, not evidence of current cash flow.

Example: A lender models 93% occupancy after lease-up rather than today's 60%.

Debt ranking behind specified senior obligations for payment, lien priority or both.

Why it matters: Subordination terms affect payment restrictions and recoveries.

Example: A seller note agrees to defer payments when senior loan covenants are breached.

Operating results for the most recent consecutive twelve months.

Why it matters: It provides a recent historical baseline, which may still require adjustments.

Example: A June review uses July of the prior year through June of the current year.

A lender's assessment of borrower, collateral, income and transaction risks.

Why it matters: Calculator outputs cannot replace a lender's documentation and judgment.

Example: A lender adjusts NOI for reserves and reviews tenant lease expirations.

Current assets less current liabilities, with transaction-specific definitions often excluding cash and debt.

Working capital = Current assets − Current liabilities

Why it matters: A business needs operating liquidity after the acquisition closes.

Example: $600,000 current assets less $350,000 current liabilities equals $250,000 working capital.

A prepayment calculation intended to compensate a lender for lost contractual interest, commonly using a reference discount rate.

Why it matters: The charge can be material and depends on the exact contract.

Example: Falling reference yields may increase the cost of early repayment.