Commercial Lending Glossary

A table showing each periodic payment on a loan broken down into principal and interest components over the life of the loan.

A large lump-sum payment due at the end of a loan term when the amortization period exceeds the loan maturity.

C&I · Commercial and Industrial Loan

A loan made to a business for working capital, equipment, expansion, or other operational purposes — as opposed to real estate–secured lending.

Capitalization Rate

The ratio of a property's net operating income (NOI) to its current market value or purchase price, expressed as a percentage.

The risk arising from excessive exposure to a single borrower, industry, geography, or loan type within a lending portfolio.

Loan Covenant

A condition or requirement written into a loan agreement that the borrower must comply with during the life of the loan.

Covenant Cushion

The distance between a borrower's current covenant ratio and the threshold written into the credit agreement, tracked as both an absolute cushion and a percentage of the threshold.

Commercial Real Estate

Real property used for business purposes, including office, retail, industrial, multifamily (5+ units), and hospitality properties.

A formal written analysis prepared by a loan officer or credit analyst that summarizes a borrower's creditworthiness, the proposed loan structure, risk factors, mitigants, and a recommendation to approve or decline.

A liquidity metric calculated as current assets divided by current liabilities, measuring a borrower's ability to pay short-term obligations with short-term assets.

The ratio of a property's net operating income to the total loan amount, expressed as a percentage.

A leverage metric calculated as total liabilities divided by total equity (or net worth), measuring how much of a business is financed by debt versus owner investment.

Debt Service Coverage Ratio

The ratio of net operating income (or available cash flow) to total annual debt service, including principal and interest payments.

The process of extracting financial data from tax returns, financial statements, and other documents and organizing it into a standardized format for credit analysis.

Fixed Charge Coverage Ratio

A broader coverage metric than DSCR that includes all fixed obligations — debt service plus lease payments, insurance, taxes, and other recurring costs.

Global Cash Flow · GCF

An underwriting approach that consolidates the cash flows of all related entities and guarantors — not just the borrowing entity — to assess total repayment capacity.

LOS

Software used by lenders to manage the end-to-end loan process from application through closing and booking.

LTC · Loan-to-Cost

The ratio of the loan amount to the total project cost, commonly used in construction and development lending.

Loan-to-Value · Loan-to-Value Ratio

The ratio of the loan amount to the appraised value of the collateral property.

MBL

A commercial loan made by a credit union to a member, regulated by NCUA Part 723 and subject to an aggregate cap of 12.25% of the credit union's assets for federally insured credit unions.

Matter Requiring Attention

A finding issued by bank examiners during a regulatory examination that identifies a deficiency requiring corrective action.

Net Operating Income

Total property revenue minus operating expenses, excluding debt service, capital expenditures, depreciation, and income taxes.

A loan arrangement where multiple lenders share in funding a single credit, typically with a lead bank originating and servicing the loan while selling portions to participating institutions.

PFS

A document detailing an individual guarantor's assets, liabilities, income, and net worth.

Acid-Test Ratio

A stricter liquidity measure than the current ratio, calculated as cash, marketable securities, and accounts receivable divided by current liabilities.

A detailed schedule of all tenants in an income-producing property, listing tenant names, unit numbers, lease start and end dates, monthly rent amounts, security deposits, and any concessions.

SBA · SBA 7(a) · SBA 504

A loan partially guaranteed by the U.S. Small Business Administration, reducing lender risk and enabling access to capital for small businesses that might not qualify for conventional financing.

K-1

A tax form (Form 1065 K-1, 1120-S K-1, 1041 K-1) that reports a partner's, shareholder's, or beneficiary's share of income, deductions, and credits from a partnership, S-corporation, or trust.

The process of evaluating a loan's performance under adverse scenarios such as rising interest rates, declining revenues, increased vacancy, or economic recession.

Trailing Twelve Months

A financial statement showing a property's actual income and expenses over the most recent twelve-month period.

Uniform Credit Analysis · UCA

A standardized indirect-method cash flow model that converts accrual-basis financial statements into cash-basis cash flow available for debt service, widely used in C&I commercial credit analysis.

UCC-1

A legal filing that establishes a lender's security interest in a borrower's personal property — equipment, inventory, accounts receivable, and similar collateral.

WALT

The average remaining lease term across all tenants in a property, weighted by each tenant's proportional share of total rental income or square footage.

The difference between current assets and current liabilities, representing the short-term liquidity available to fund day-to-day operations.