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Glossary key terms
Amortization
Reducing debt gradually through monthly installments of principal and interest.
Apartment Building
Apartment buildings are properties containing five or more living units with common area amenities such as lobby, mechanical space, walks, elevators, entrances, stairs or grounds. Units must be rented on a non-temporary basis, such that tenants consider their unit their permanent residence. Apartment buildings are also known as multi-family housing.
Appraisal
Written report by an appraiser containing an unbiased opinion as to the value of a property and the reasoning leading to this opinion. Factual data supporting this value will be set forth.
Appraisal Order Form
Signed by the borrower, this form authorizes a professional appraisal to be performed on a subject property.
Assumability
The ability for another borrower to take over the previous borrower's mortgage note.
Automotive
Automotive is a broad category that includes an array of uses that support the automotive sector. This category encompasses oil-change facilities, auto repair shops, tire repair shops, used car lots, etc. The size and type of the structure will vary with use. Many structures are designed explicitly for the auto trade and have car lifts, overhead doors, and typically a small office area.
Balloon mortgage
A form of mortgage with a promissory note that calls for the minimum payment of principal and interest at regular intervals, usually for 10 years or less. This type of note requires a substantial final payment, which represents the entire remaining principal.
Balloon payment
A balloon mortgage's final payment, which is substantially larger than the previous payments.
Conditional pre-approval letter
A written promise to make a mortgage loan at some time in the future if specified conditions are met according to the conditions set at pre-approval.
Day Care
Day Care centers include early childhood, adult, senior care, handicapped facilities and developmental centers. They have activity rooms, multiple restrooms, and light kitchen facilities and are more residential in character than schools. Nurseries, children’s preschools, and kindergartens fall under this category.
Debt Service Coverage Ratio (DSCR)
A property's ability to cover monthly payments defined as the ratio of net operating income over the periodic payment (principal and interest) made on a loan.
A DSCR of less than 1.00 means there is insufficient cash-flow generated by the property to cover required debt payments.
DSCR = (subject property gross monthly rents - operating expenses) divided by the (subject property monthly qualifying principal and interest
Defeasance
A common form of prepayment penalty in mortgages obtained through Wall Street conduits. It requires that borrowers who want to sell or refinance a collateral loan and consequently prepay their current loan, purchase securities as a substitute for the collateral property. The income from the securities pays off the loan over time, giving the lender a continuing source of income.
Environmental report
A report generated by qualified environmental firms to determine potential environmental hazards in a building's region or within the building itself.
Exit points/Exit fee
A fee charged by the lender when the mortgage is paid off, whether it is paid off early or on time.
Financial covenant
A provision in which the borrower agrees to certain guidelines for the future financial strength of the business which must be maintained throughout the life of the loan. If the borrower experiences business difficulties or loses a tenant, the lender has the right to find the borrower in default even if all loan payments are current.
Funeral Home
Funeral homes consist of structures used for viewing purposes as well as those used for embalming services.
Health Care
Health care properties include assisted living and nursing home type facilities where an operational license is mandatory. Service and quality levels vary significantly. Hospitals and medical treatment facilities, such as walk-in emergency medicine and out-patient care, are also included in this category.
Index
A published index used to establish interest rates charged on adjustable-rate mortgages. The predetermined margin is added to the index to compute the interest rate adjustment.
Industrial
An industrial property’s primary structure is intended for heavy assembly, manufacturing processes, or requires the use of heavy machinery. It contains an average quantity of office space proportional to the quality of the building and the anticipated use. Industrial facilities are characterized by their walls and floors, heavy frames, specialized manufacturing processes and power or utility-service.
LIBOR (London Interbank Offered Rate)
The average rate of interest that major London banks are willing to pay each other for U.S. dollar deposits for various terms.
Light Industrial
Light Industrial properties are small size facility where no heavy manufacturing or specialized industrial operations take place. Office space within light industrial properties varies from 3% to 25% of the entire area. Structures must include sufficient lighting and plumbing to accommodate personnel. Typical uses found in light industrial properties consist of home service industries, assembly processes, cabinet making, etc. Missing from these properties is any type of heavy machinery, cranes, hazardous materials or welding operations.
Lock-out period
A period of time after the loan origination during which a borrower cannot prepay the mortgage loan without penalty. If the borrower decides to pay off the loan in this lock-out period, they must pay the interest for the remaining time of the lock-out.
Mixed-Use
Mixed-use properties must include at least one commercial component (office, retail, etc.) and at least one residential component. If the principal use of the property is for commercial purposes, the property will fall under our mixed-use Tier II guidelines. The mixed-use property type can be categorized in any tier depending on the percentage of multifamily component and the kind of commercial use.
Mobile Home Park
Mobile home parks are eligible as long as not more than 25% of the total spaces are used for Recreational Vehicles. Mobile home parks differ in quality and amenities and will be considered unless the RV component is too high.
Motel
Motel properties are usually classified as either "flagged" or "unflagged" hospitality. Flagged hospitality properties carry national franchises whereas unflagged hospitality properties do not have national franchise affiliations and are usually smaller and privately owned and operated.
Multifamily
Multifamily properties are buildings containing five or more living units with common area amenities such as lobby, mechanical space, walks, elevators, entrances, stairs or grounds. Units must be rented on a non-temporary basis, such that tenants consider their unit their permanent residence. Properties that offer weekly or monthly housing would not be considered multifamily properties.
No further action letter
A letter that states that no further clean-up is required at a site that has had environmental contamination problems.
Office
Office buildings are structures designed for general commercial use and are usually subdivided into smaller units. Office use implies a general business use that does not include manufacturing, warehouse type operations, or retail.
Origination points/Origination fee
A charge by the lender for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.
Owner-occupied property
A single tenant property where the owner's business resides or a multi-tenant investment property where the owner's business operates. Also, lenders have different policies as to what percentage of rents need to be contributed by the borrower in order for the property to qualify as owner-occupied.
Parallel Processing
A unique approach used by Commercial Direct® to facilitate a faster closing. Title, Appraisal and Environmental Due Diligence is ordered and performed simultaneously.
Phase I Environmental Assessment
An assessment prepared by a professional environmental consultant who reviews the property—both land and improvements—to ascertain the presence or potential presence
of environmental hazards, such as underground water contamination, PCBs, abandoned disposal of paints, and underground storage tanks.
Phase II Environmental Assessment
A further assessment after Phase I to verify the presence (or absence) of contaminants in the water or soil at the site. This assessment includes sampling activities (groundwater, soil, surface water, etc.) and is undertaken if there is any reason to suspect contamination.
Prime rate
The most favorable interest rate charged by banks to their most creditworthy customers for short-term loans, not mortgages.
Point
A one-time finance charge, equal to one percent of the loan amount, charged by a broker or lender to raise the yield on the loan. The number of points charged can vary from lender to lender.
Rent roll
A listing of all tenants in a building, with monthly rent amounts and lease expiration dates.
Restaurant
Restaurants are intended for the preparation and sale of food and/or beverages. This category includes cafeterias, taverns, and bars.
Retail
Retail buildings are intended for retail sales and display and generally have decorative fronts. This category includes a wide variety of uses including, but not limited to, department stores, big box retailers, grocer stores, convenience stores, drugstores, laundromats, barber shops, etc.
Rooming House
Rooming houses are similar to multifamily properties but the tenancy is more temporary. Rooms are rented on a daily, weekly or monthly basis and typically only include a bedroom. Bathrooms and kitchens are shared by the tenants. Rent paid frequently includes all utilities and units may be furnished. Rooming house properties generally contain less than 20 units.
Secondary Financing
Funding using a loan secured by a second mortgage or second lien on a property.
Title Preference Form
Signed by the borrower, this form indicates how the title insurance should be secured, either by Commercial Direct or through the borrower.
Underwriting
An evaluation of loan documents in order to approve or deny a mortgage loan.
Unflagged Hospitality
Unflagged hospitality is a motel or hotel property with no national franchise affiliation. “Mom & Pop” style operators commonly run these types of properties and the level and quality of service is significantly varied.
Warehouse
Warehouses are designed mostly for storage use. Office space, ranging from 3% to 12% of the total area, is typically proportional with the quality of the building. Lighting and plumbing are normally limited due to the projected light personnel load. The design of the structure generally consists of a light frame with large open interior areas. Transit warehouses (truck terminal) and cold storage are included in this category.
Yield maintenance provision
A prepayment penalty that compensates the lender if the borrower refinances a loan during the prepayment period. It guarantees that the lender will receive the same yield that would
have been received if the borrower had not refinanced.
Reducing debt gradually through monthly installments of principal and interest.
Apartment Building
Apartment buildings are properties containing five or more living units with common area amenities such as lobby, mechanical space, walks, elevators, entrances, stairs or grounds. Units must be rented on a non-temporary basis, such that tenants consider their unit their permanent residence. Apartment buildings are also known as multi-family housing.
Appraisal
Written report by an appraiser containing an unbiased opinion as to the value of a property and the reasoning leading to this opinion. Factual data supporting this value will be set forth.
Appraisal Order Form
Signed by the borrower, this form authorizes a professional appraisal to be performed on a subject property.
Assumability
The ability for another borrower to take over the previous borrower's mortgage note.
Automotive
Automotive is a broad category that includes an array of uses that support the automotive sector. This category encompasses oil-change facilities, auto repair shops, tire repair shops, used car lots, etc. The size and type of the structure will vary with use. Many structures are designed explicitly for the auto trade and have car lifts, overhead doors, and typically a small office area.
Balloon mortgage
A form of mortgage with a promissory note that calls for the minimum payment of principal and interest at regular intervals, usually for 10 years or less. This type of note requires a substantial final payment, which represents the entire remaining principal.
Balloon payment
A balloon mortgage's final payment, which is substantially larger than the previous payments.
Conditional pre-approval letter
A written promise to make a mortgage loan at some time in the future if specified conditions are met according to the conditions set at pre-approval.
Day Care
Day Care centers include early childhood, adult, senior care, handicapped facilities and developmental centers. They have activity rooms, multiple restrooms, and light kitchen facilities and are more residential in character than schools. Nurseries, children’s preschools, and kindergartens fall under this category.
Debt Service Coverage Ratio (DSCR)
A property's ability to cover monthly payments defined as the ratio of net operating income over the periodic payment (principal and interest) made on a loan.
A DSCR of less than 1.00 means there is insufficient cash-flow generated by the property to cover required debt payments.
DSCR = (subject property gross monthly rents - operating expenses) divided by the (subject property monthly qualifying principal and interest
Defeasance
A common form of prepayment penalty in mortgages obtained through Wall Street conduits. It requires that borrowers who want to sell or refinance a collateral loan and consequently prepay their current loan, purchase securities as a substitute for the collateral property. The income from the securities pays off the loan over time, giving the lender a continuing source of income.
Environmental report
A report generated by qualified environmental firms to determine potential environmental hazards in a building's region or within the building itself.
Exit points/Exit fee
A fee charged by the lender when the mortgage is paid off, whether it is paid off early or on time.
Financial covenant
A provision in which the borrower agrees to certain guidelines for the future financial strength of the business which must be maintained throughout the life of the loan. If the borrower experiences business difficulties or loses a tenant, the lender has the right to find the borrower in default even if all loan payments are current.
Funeral Home
Funeral homes consist of structures used for viewing purposes as well as those used for embalming services.
Health Care
Health care properties include assisted living and nursing home type facilities where an operational license is mandatory. Service and quality levels vary significantly. Hospitals and medical treatment facilities, such as walk-in emergency medicine and out-patient care, are also included in this category.
Index
A published index used to establish interest rates charged on adjustable-rate mortgages. The predetermined margin is added to the index to compute the interest rate adjustment.
Industrial
An industrial property’s primary structure is intended for heavy assembly, manufacturing processes, or requires the use of heavy machinery. It contains an average quantity of office space proportional to the quality of the building and the anticipated use. Industrial facilities are characterized by their walls and floors, heavy frames, specialized manufacturing processes and power or utility-service.
LIBOR (London Interbank Offered Rate)
The average rate of interest that major London banks are willing to pay each other for U.S. dollar deposits for various terms.
Light Industrial
Light Industrial properties are small size facility where no heavy manufacturing or specialized industrial operations take place. Office space within light industrial properties varies from 3% to 25% of the entire area. Structures must include sufficient lighting and plumbing to accommodate personnel. Typical uses found in light industrial properties consist of home service industries, assembly processes, cabinet making, etc. Missing from these properties is any type of heavy machinery, cranes, hazardous materials or welding operations.
Lock-out period
A period of time after the loan origination during which a borrower cannot prepay the mortgage loan without penalty. If the borrower decides to pay off the loan in this lock-out period, they must pay the interest for the remaining time of the lock-out.
Mixed-Use
Mixed-use properties must include at least one commercial component (office, retail, etc.) and at least one residential component. If the principal use of the property is for commercial purposes, the property will fall under our mixed-use Tier II guidelines. The mixed-use property type can be categorized in any tier depending on the percentage of multifamily component and the kind of commercial use.
Mobile Home Park
Mobile home parks are eligible as long as not more than 25% of the total spaces are used for Recreational Vehicles. Mobile home parks differ in quality and amenities and will be considered unless the RV component is too high.
Motel
Motel properties are usually classified as either "flagged" or "unflagged" hospitality. Flagged hospitality properties carry national franchises whereas unflagged hospitality properties do not have national franchise affiliations and are usually smaller and privately owned and operated.
Multifamily
Multifamily properties are buildings containing five or more living units with common area amenities such as lobby, mechanical space, walks, elevators, entrances, stairs or grounds. Units must be rented on a non-temporary basis, such that tenants consider their unit their permanent residence. Properties that offer weekly or monthly housing would not be considered multifamily properties.
No further action letter
A letter that states that no further clean-up is required at a site that has had environmental contamination problems.
Office
Office buildings are structures designed for general commercial use and are usually subdivided into smaller units. Office use implies a general business use that does not include manufacturing, warehouse type operations, or retail.
Origination points/Origination fee
A charge by the lender for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.
Owner-occupied property
A single tenant property where the owner's business resides or a multi-tenant investment property where the owner's business operates. Also, lenders have different policies as to what percentage of rents need to be contributed by the borrower in order for the property to qualify as owner-occupied.
Parallel Processing
A unique approach used by Commercial Direct® to facilitate a faster closing. Title, Appraisal and Environmental Due Diligence is ordered and performed simultaneously.
Phase I Environmental Assessment
An assessment prepared by a professional environmental consultant who reviews the property—both land and improvements—to ascertain the presence or potential presence
of environmental hazards, such as underground water contamination, PCBs, abandoned disposal of paints, and underground storage tanks.
Phase II Environmental Assessment
A further assessment after Phase I to verify the presence (or absence) of contaminants in the water or soil at the site. This assessment includes sampling activities (groundwater, soil, surface water, etc.) and is undertaken if there is any reason to suspect contamination.
Prime rate
The most favorable interest rate charged by banks to their most creditworthy customers for short-term loans, not mortgages.
Point
A one-time finance charge, equal to one percent of the loan amount, charged by a broker or lender to raise the yield on the loan. The number of points charged can vary from lender to lender.
Rent roll
A listing of all tenants in a building, with monthly rent amounts and lease expiration dates.
Restaurant
Restaurants are intended for the preparation and sale of food and/or beverages. This category includes cafeterias, taverns, and bars.
Retail
Retail buildings are intended for retail sales and display and generally have decorative fronts. This category includes a wide variety of uses including, but not limited to, department stores, big box retailers, grocer stores, convenience stores, drugstores, laundromats, barber shops, etc.
Rooming House
Rooming houses are similar to multifamily properties but the tenancy is more temporary. Rooms are rented on a daily, weekly or monthly basis and typically only include a bedroom. Bathrooms and kitchens are shared by the tenants. Rent paid frequently includes all utilities and units may be furnished. Rooming house properties generally contain less than 20 units.
Secondary Financing
Funding using a loan secured by a second mortgage or second lien on a property.
Title Preference Form
Signed by the borrower, this form indicates how the title insurance should be secured, either by Commercial Direct or through the borrower.
Underwriting
An evaluation of loan documents in order to approve or deny a mortgage loan.
Unflagged Hospitality
Unflagged hospitality is a motel or hotel property with no national franchise affiliation. “Mom & Pop” style operators commonly run these types of properties and the level and quality of service is significantly varied.
Warehouse
Warehouses are designed mostly for storage use. Office space, ranging from 3% to 12% of the total area, is typically proportional with the quality of the building. Lighting and plumbing are normally limited due to the projected light personnel load. The design of the structure generally consists of a light frame with large open interior areas. Transit warehouses (truck terminal) and cold storage are included in this category.
Yield maintenance provision
A prepayment penalty that compensates the lender if the borrower refinances a loan during the prepayment period. It guarantees that the lender will receive the same yield that would
have been received if the borrower had not refinanced.
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This is not an offer to make a loan or to make a loan on any particular terms. All loan applicants must submit a written application and all required documentation. All information submitted by loan applicants is subject to verification. All loan applicants must qualify under our underwriting requirements and satisfy all contingencies of loan approval. Loan approval will be subject to satisfactory appraisal, title review and no change in financial condition. Some loan types may not be available in all jurisdictions. This loan program is subject to change without notice. This loan program is for business purpose and commercial loans only. Copyright 2003 - 2008 Bayview Financial Small Business Funding, LLC. All rights reserved.
