Commercial loan sizing calculator
Commercial lenders size a loan with three rules and lend the smallest amount any of them allows. See the most you can borrow, which rule limits you and the cash you need to close.
What this answers: How much will a commercial lender let me borrow on this property, and how much cash do I need to bring?
Start from an example, then change any number:
A lender would likely lend about $1,131,895 (67% of the price): the DSCR rule is the limit here. You'd bring about $608,105 to close. To borrow more, you'd need more NOI, a lower rate or a longer amortization.
- DSCR rule · your limit$1,131,895
- Loan-to-value rule$1,275,000
- Debt yield rule$1,333,333
- Loan-to-value at this loan
- 66.6%
- Debt yield at this loan
- 10.6%
How this is calculated
- 1DSCR rule: the yearly loan payments can be at most NOI ÷ minimum DSCR. The loan is the amount that payment pays off over the amortization period at your rate.
- 2LTV rule: loan ≤ purchase price × maximum LTV %.
- 3Debt yield rule: loan ≤ NOI ÷ minimum debt yield %. It ignores the rate and amortization.
- 4Maximum loan = the smallest of the three (never more than the price). That rule is the one "binding" you.
- 5Down payment = price − maximum loan. Cash to close = down payment + closing costs.
Lenders also look at your credit, experience, net worth, the tenants and the property's condition, and they use their own NOI (often lower than the seller's). Treat this as a first estimate, not a loan offer. Set a rule to 0 if your lender doesn't use it.
Words to know
- NOI (net operating income)
- Yearly rent and other income after vacancy, minus operating expenses. Loan payments aren't an expense here.
- DSCR (debt service coverage ratio)
- NOI ÷ yearly loan payments. 1.25 means the property earns 25% more than the payments. Lenders usually want 1.20–1.35.
- LTV (loan-to-value)
- Loan ÷ the property's price or appraised value. Commercial lenders usually cap it at 65–80%.
- Debt yield
- NOI ÷ loan amount. It shows how fast a lender would get its money back from the income alone. 8–10% is a common minimum.
- Binding rule
- Whichever rule gives the smallest loan. It's the one you'd need to change, by raising NOI or putting more down, to borrow more.
- Amortization
- The years the payment is figured over. A longer amortization lowers the payment, so the DSCR rule allows a bigger loan.
Frequently asked questions
- Where do I find a property's NOI?
- Ask the seller or broker for the trailing 12-month operating statement and the rent roll. Rebuild NOI yourself: income after vacancy minus taxes, insurance, repairs, management, utilities and reserves. The commercial property calculator does this.
- What if my lender only uses DSCR and LTV?
- Set the minimum debt yield to 0. The calculator skips any rule set to 0.
- Can I use this for an SBA or bank loan?
- Yes, as a first estimate. Banks usually size on DSCR and LTV. SBA loans can allow higher LTV, and your lender may also check your business income.
- Does the maximum loan include closing costs?
- No. The loan is limited by the rules above. Closing costs are paid in cash and added to your down payment in "cash to close".
- Why does a higher interest rate lower the maximum loan?
- A higher rate means a bigger payment for the same loan. Since the DSCR rule caps the payment, the loan that fits under it gets smaller.