Understanding Loan Terms: What Developers Need to Know

Real estate financing can feel dense if you’re not fluent in the language. From acronyms to industry-specific phrases, the terminology surrounding commercial loans isn’t always straightforward—but it matters. We work with developers every day who need to make fast, informed decisions, and we believe clarity is key. That’s why we spend time walking through the terms that impact how a loan works—not just on day one, but throughout the life of the deal. 

Here’s how we explain a few of the core concepts we see come up most often in our conversations with borrowers. 

Loan-to-Value (LTV)
This is one of the first metrics we look at when evaluating a deal. LTV measures how much you’re borrowing compared to the property’s appraised value. A lower LTV often signals stronger equity in the deal, which can lead to more favorable terms. But it’s not just about hitting a percentage—we look at how the loan amount relates to the overall project plan, including market conditions and sponsorship strength. 

Debt Service Coverage Ratio (DSCR)
We use DSCR to evaluate a project’s ability to generate enough income to cover loan payments. It’s a basic but important indicator of how comfortably the property can support its own debt. A higher DSCR generally means more breathing room for both the borrower and the lender. When we underwrite, we’re not just looking for a pass/fail number—we’re looking for a ratio that reflects the realities of your lease-up, operations, and stabilization timeline. 

Mezzanine Financing
This term often comes up when developers are trying to bridge the gap between what senior debt can provide and the total capital needed. Mezzanine financing offers a way to do that without giving up as much equity as a full JV partnership might require. It sits between traditional debt and equity in the capital stack, and it comes with its own risks and returns. We’ve structured mezz pieces for a range of deals, especially when flexibility and capital efficiency are key. 

Amortization Schedule
Understanding how your loan amortizes—how principal and interest are paid over time—is critical. Some loans are fully amortizing, others interest-only for a period, and some include balloon payments. We walk through these schedules with our borrowers because we want to make sure the repayment structure actually fits the project’s timeline. If you’re planning to refinance or sell before full maturity, the amortization profile needs to reflect that. 

Recourse vs. Non-Recourse Loans
This is one of the most important distinctions for any borrower to understand. A recourse loan means you’re personally on the hook if the project doesn’t perform. A non-recourse loan limits that liability to the asset itself, except in specific situations like fraud or misrepresentation. At HALL Structured Finance, we specialize in non-recourse lending because it gives our borrowers more protection—and because we underwrite the project, not just the person behind it. 

Final Thought
The language of commercial real estate lending doesn’t have to be a barrier. When terms are explained clearly, they become tools—helping you structure deals that work not just on paper, but in execution. At HSF, we take the time to walk through these concepts because we know a better-informed borrower is a stronger partner. And that leads to better projects, start to finish.