Loan Sizing Calculator: Maximum Loan Amount
Calculate maximum commercial loan amount using DSCR, LTV, and debt yield constraints. Identify the binding constraint and optimize your loan structure.
Implied Cap Rate: 7.14%
$1,886,492
Constrained by: DSCR
Required Equity
$913,508
32.6%
Monthly Payment
$13,333
P&I
Notice how DSCR becomes the binding constraint at higher interest rates, while debt yield or LTV constrains at lower rates.
If DSCR Constrains
- • Increase NOI (raise rents, reduce expenses)
- • Negotiate a lower interest rate
- • Extend amortization (25yr → 30yr)
- • Request interest-only period
- • Provide additional collateral/recourse
If LTV Constrains
- • Get a higher appraisal
- • Contribute more equity
- • Find a lender with higher LTV limits
- • Consider SBA financing (up to 90% LTV)
- • Add mezzanine or preferred equity
If Debt Yield Constrains
- • Increase NOI (only way to improve DY)
- • Note: Rate/amort changes won't help
- • Consider value-add to increase income
- • Find lender with lower DY requirement
- • Bridge loan with NOI growth plan
A loan sizing calculator determines the maximum loan amount for a commercial real estate property based on multiple constraints: Loan-to-Value (LTV), Debt Service Coverage Ratio (DSCR), and Debt Yield. The loan is sized to the most restrictive constraint.
Formula:
Max Loan = MIN(LTV constraint, DSCR constraint, Debt Yield constraint)Each constraint produces a maximum loan amount; the final loan is the smallest (most restrictive) of these values.
- 1
Enter the property value or purchase price
- 2
Input the net operating income (NOI)
- 3
Set the interest rate and amortization period
- 4
Enter lender requirements (max LTV, min DSCR, min debt yield)
- 5
View maximum loan from each constraint
- 6
See which constraint is binding (most restrictive)
- Determines realistic financing expectations
- Shows which metric limits your borrowing capacity
- Helps structure deals to maximize leverage
- Essential for acquisition and refinance analysis
- Identifies opportunities to improve loan terms
- Analyzing commercial acquisition financing
- Preparing loan requests
- Comparing lender term sheets
- Stress-testing deals with different assumptions
- Determining equity requirements
- Planning value-add improvements to increase NOI
- •Higher NOI improves both DSCR and debt yield constraints
- •Interest-only periods improve DSCR but don't affect debt yield
- •Lower cap rate properties often hit LTV constraint first
- •Build in cushion above minimum requirements for approval flexibility
Have questions about using this calculator? Check out our financial guides or contact us for help.
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Frequently Asked Questions
How do lenders determine maximum loan amount?
Lenders use three primary constraints: DSCR (debt service coverage ratio), LTV (loan-to-value), and debt yield. They calculate the maximum loan under each constraint and use the LOWEST amount. This conservative approach ensures the loan meets all underwriting requirements.
What is the most common constraining factor in loan sizing?
It depends on the market. In low interest rate environments, debt yield often constrains. In high rate environments, DSCR typically constrains. For value-add properties with lower appraised values, LTV may constrain. Understanding which factor limits your loan helps you negotiate better terms.
Can I increase my maximum loan amount?
Yes, by addressing the constraining factor. If DSCR constrains: increase NOI, get a lower rate, or extend amortization. If LTV constrains: get a higher appraisal or more equity. If debt yield constrains: increase NOI (debt yield is rate-independent). Sometimes recourse or additional collateral helps.
What are typical lender requirements for commercial loans?
Common requirements: DSCR 1.20x-1.35x minimum, LTV 65%-80% maximum, debt yield 8%-10% minimum. SBA loans may allow higher LTV (85-90%) with lower DSCR (1.15x). CMBS is typically more conservative on debt yield (10%+) but may allow higher LTV.
How does amortization affect loan sizing?
Longer amortization reduces annual debt service, improving DSCR and allowing larger loans. A 30-year amort vs 20-year can increase DSCR-constrained loan by 15-20%. However, debt yield is unaffected by amortization, so if debt yield constrains, extending amort won't help.