RivetRatio · Borrower preparation

Commercial loan ratios, in plain language

DSCR, LTV, LTC, and debt yield answer different questions about property income, collateral, project cost, and loan size. Learn what each calculation says—and what it leaves for a lender to decide.

Preparation guidance only. These ratios can help you organize assumptions and questions. They do not determine eligibility, predict a lending decision, or promise loan approval.

Four ways to frame a financing request

A ratio is a calculation based on selected inputs. It can make a conversation more specific, but two lenders may not choose the same inputs or apply the same benchmark. Keep your source figures and assumptions visible, and ask how the lender defines each one.

DSCR: does income cover the debt payments?

The debt service coverage ratio (DSCR) compares a property's annual net operating income (NOI) with its annual debt service. In everyday terms, it shows how the income counted for the property compares with the loan payments counted for the same year. Open the DSCR calculator to explore the ratio with your own figures.

Formula

DSCR = annual NOI ÷ annual debt service

Result: A multiple, such as 1.25x.

Illustrative math: $150,000 annual NOI ÷ $100,000 annual debt service = 1.50x. The figures are examples, not a lender threshold.

Why DSCR benchmarks and calculations vary

A lender may calculate DSCR differently for underwriting than for covenant monitoring. It may consider current income, stabilized income, or both—especially when occupancy, leases, incentives, or an interest-only period affect the picture. Program, property, lease, and market conditions also affect the benchmark. The researched 1.10x–1.40x examples are contextual illustrations across programs and markets, not a universal range or approval rule. Ask which NOI, expenses, debt payments, and measurement period the lender uses.

LTV: how large is the loan relative to property value?

Loan-to-value (LTV) compares the loan amount with the property value used for the calculation. The value is generally tied to an appraisal or evaluation; it is not necessarily the purchase price or a value you estimate yourself. Open the LTV calculator to explore the ratio with your own figures.

Formula

LTV = loan amount ÷ appraised property value × 100

Result: A percentage.

Illustrative math: $1,200,000 loan ÷ $1,500,000 appraised value × 100 = 80% LTV. This is an example calculation, not a target.

What can change an LTV calculation

The appraisal or evaluation basis and timing can affect the value used. Loan programs also set their own limits and may apply them differently by property or transaction. Ask which valuation the lender will use and which program limit applies to your request; an LTV by itself does not establish eligibility.

LTC: how much of the project cost is financed?

Loan-to-cost (LTC) compares the loan amount with the total cost of a project. For a construction or renovation project, total project cost includes land, hard costs, and soft costs. Unlike LTV, LTC uses project cost as its denominator rather than the property's appraised value. Open the LTC calculator to explore the ratio with your own figures.

Formula

LTC = loan amount ÷ total project cost (land + hard costs + soft costs) × 100

Result: A percentage.

Illustrative math: $1,300,000 loan ÷ $2,000,000 total project cost × 100 = 65% LTC. These sample costs are not a lender quote.

Commercial construction guidance is project-specific

Reported commercial-construction LTC guidance spans 65%–80%. That range varies by project and borrower, so it is industry context rather than a universal limit or a promise of available financing. Lenders may also differ on which budget items and contingencies count toward total project cost. Confirm their cost definition and required borrower contribution.

Debt yield: how much NOI supports the loan amount?

Debt yield compares a property's annual NOI with the loan amount. It gives a lender a way to view property income relative to the dollars advanced, without putting the property's market value in the formula. Open the debt-yield calculator to explore the ratio with your own figures.

Formula

Debt yield = annual NOI ÷ loan amount × 100

Result: A percentage.

Illustrative math: $150,000 annual NOI ÷ $1,500,000 loan × 100 = 10% debt yield. This example is not a qualification test.

Debt yield is not used the same way by every lender

Debt-yield use varies by lender type. CMBS lenders may give it particular weight, while other lenders may use it less often or alongside other measures. The researched 8%–12% range is an industry benchmark, not a universal rule or a guaranteed acceptance range. Ask whether the lender uses debt yield and which NOI and loan amount it includes.

Confirm the terms behind the numbers

The supplied ratio research did not establish a definition for “global cash flow.” This guide does not define that term or treat it as synonymous with property NOI. If a lender uses it, ask for that lender's own definition and calculation.

Before comparing your estimates with a lender's figures, consider asking:

Which income, expenses, debt payments, and time period go into DSCR?
Will the lender look at current income, stabilized income, or both?
Which appraisal or evaluation and program limit will be used for LTV?
Which land, hard, and soft costs count in the LTC project budget?
Does this lender use debt yield, and how does it define the inputs?

Use the ratios to prepare—not to predict approval

Keep the source of each number, the date, and any assumptions with your estimate. A lender may use different inputs and will review other details about the borrower, property, loan structure, and program. No ratio or estimate promises loan approval.

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