Clear, practitioner-level definitions of the terms that drive commercial real estate credit decisions. Written for lending teams, not textbooks.
Net operating income divided by property value (or purchase price). Expressed as a percentage. A 7% cap rate means the property generates 7 cents of NOI per dollar of value annually.
Why It Matters in Underwriting: Cap rates are the market's shorthand for risk and return expectations. In CRE lending, cap rates inform exit assumptions, value stress-tests, and market comparisons. An underwriter who ignores cap rate trends is pricing risk blind.
Market Intelligence tracks cap rate trends by property type and submarket, giving underwriters real-time context for every deal.
The formal document presented to a loan committee that summarizes the borrower, property, deal structure, risk assessment, and recommendation. It is the written case for why a loan should (or should not) be approved.
Why It Matters in Underwriting: The credit memo is the final output of the underwriting process. Inconsistent memos slow approvals, create audit risk, and force senior lenders to spend hours on revisions.
LenderBox generates committee-ready credit memos automatically from the analysis already completed during underwriting.
Net operating income divided by annual debt service (principal + interest). A DSCR of 1.25x means the property generates 25% more income than required to service the debt.
Why It Matters in Underwriting: DSCR is the most fundamental measure of a CRE loan's ability to repay from property cash flow. Most credit policies set minimum DSCR thresholds (typically 1.20x-1.35x depending on property type).
Deal Structuring automatically sizes loans against DSCR, LTV, and debt yield constraints simultaneously.
Net operating income divided by loan amount, expressed as a percentage. A 10% debt yield means the property generates 10 cents of NOI per dollar of debt.
Why It Matters in Underwriting: Debt yield measures loan risk independent of cap rate and interest rate assumptions. Many institutional lenders require minimum debt yields of 8-10% as a floor.
Policy Intelligence enforces debt yield minimums alongside DSCR and LTV constraints on every deal.
Environmental Site Assessments that evaluate potential contamination risk. Phase I is a records review and site inspection. Phase II involves physical testing if Phase I identifies concerns.
Why It Matters in Underwriting: Environmental liability can exceed property value. Lenders require Phase I ESAs on virtually all CRE transactions to avoid inheriting cleanup obligations.
Document Intelligence extracts key findings from environmental reports, including RECs and recommended further action.
Loan file documentation organized and formatted to satisfy bank regulatory examiners (OCC, FDIC, state regulators) during routine examinations. Includes clear policy compliance evidence, exception documentation, and traceable decision rationale.
Why It Matters in Underwriting: Incomplete documentation creates findings, which create enforcement actions, which create real business consequences for your institution.
Every LenderBox analysis generates a complete audit trail with policy compliance confirmation, built for examiner review from the start.
Loan amount divided by property value (appraised or as-stabilized). A 75% LTV means the borrower has 25% equity in the property relative to its appraised value.
Why It Matters in Underwriting: LTV measures the equity cushion protecting a lender against loss. Most credit policies cap LTV by property type (typically 65-80%), with lower maximums for higher-risk assets.
Policy Intelligence enforces LTV maximums by property type, and Deal Structuring sizes every loan to meet all constraints simultaneously.
The internal body (typically 3-7 senior officers) that reviews and approves or declines loan requests above a delegated authority threshold. Committees evaluate credit memos, impose conditions, and make the final credit decision.
Why It Matters in Underwriting: Everything in the underwriting process exists to support the loan committee's decision. The quality of the analysis determines whether committee time is spent productively.
LenderBox's entire workflow produces committee-ready packages: fully analyzed, policy-checked, stress-tested, and documented for efficient review.
Gross revenue minus operating expenses (excluding debt service, capital expenditures, and depreciation). NOI represents the property's cash flow available to service debt and provide returns to equity.
Why It Matters in Underwriting: NOI is the denominator in virtually every CRE valuation and coverage metric (cap rate, DSCR, debt yield). Getting NOI right requires careful extraction from rent rolls and operating statements.
Document Intelligence extracts financial data from operating statements and rent rolls, calculating NOI with appropriate adjustments.
A loan characteristic that falls outside the boundaries established in an institution's credit policy. Exceptions require documented justification, additional approval (often board-level), and ongoing monitoring.
Why It Matters in Underwriting: Exceptions are not inherently bad, but undocumented or untracked exceptions create regulatory risk. Examiners scrutinize exception rates and justification quality.
Policy Intelligence automatically flags every exception before the term sheet is generated and maintains portfolio-wide exception tracking.
A document listing all tenants in a property, their lease terms, rental rates, square footage occupied, lease expiration dates, and any concessions or free rent periods. The foundational input for underwriting income-producing CRE.
Why It Matters in Underwriting: The rent roll is where underwriting begins for any stabilized property. Extracting accurate data from rent rolls (which arrive in every conceivable format) is one of the most time-consuming manual tasks in CRE lending.
Document Intelligence extracts tenant data from rent rolls in any format and structures it for analysis in minutes.
An audit framework that evaluates whether a service organization's controls over security, availability, processing integrity, confidentiality, and privacy are designed effectively (Type I) and operating effectively over time (Type II).
Why It Matters in Underwriting: Banks and regulated financial institutions require SOC 2 Type II compliance from any vendor that handles sensitive loan data. It is a non-negotiable procurement requirement for most community and regional banks.
LenderBox maintains SOC 2 Type II compliance with continuous monitoring, ensuring bank-grade security standards.
Evaluation of the borrower's financial strength, experience, track record, and character. Includes review of personal financial statements, schedule of real estate owned, liquidity, net worth, and prior project performance.
Why It Matters in Underwriting: Property quality is half the credit decision. Sponsor quality is the other half. A strong sponsor materially reduces the probability of default, even if property performance temporarily deteriorates.
Document Intelligence extracts sponsor financial data, and Risk Assessment scores sponsor strength as part of the overall evaluation.
Analyzing how a loan performs under adverse scenarios: interest rate increases, vacancy spikes, NOI declines, cap rate expansion, or delayed lease-up. Stress tests reveal whether a deal can survive downturns without triggering default.
Why It Matters in Underwriting: A loan that only works under current conditions is a loan waiting for a market shift to become a problem. Examiners expect stress testing as standard practice.
Deal Structuring runs multiple stress scenarios simultaneously, showing exactly where each deal's break-even lives.
A preliminary, non-binding document outlining the proposed terms of a loan: amount, rate, term, amortization, LTV, DSCR requirements, recourse provisions, fees, and key conditions. The term sheet is the lender's offer to the borrower.
Why It Matters in Underwriting: Speed to term sheet often determines whether a lender wins a deal, particularly in competitive private credit markets. Errors or inconsistencies here cascade through the entire closing process.
Deal Structuring generates committee-ready term sheets in minutes with every assumption documented and multiple scenarios compared side by side.
LenderBox connects every stage of CRE underwriting, from document extraction through credit memo. Every term in this glossary maps to a real workflow in the platform.
See how LenderBox handles DSCR sizing, policy enforcement, stress testing, and more for lending teams like yours.
