Glossary
Loan to value ratio (LVR)
The loan amount as a percentage of the lender's assessed value of the security behind it. The security-side twin of the servicing tests.
In plain English
Where DSCR asks whether earnings can carry the debt, the loan to value ratio asks what stands behind it if they cannot. Divide the facility by the lender's assessed value of the security, usually property, and you have the LVR: a $700,000 loan against security assessed at $1,000,000 is 70%.
Lenders hold LVR limits by security type, and business lending secured by property typically prices better and stretches further than lending without it. The lender's assessed figure for the security is its own process and its own conversation, and it frequently lands below what the owner believes.
Why a lender cares
Credit approves deals on servicing and secures them on LVR; strength in one can buy tolerance in the other, but rarely much. We have had combined positions acknowledged well above standard parameters approved because the earnings evidence was strong enough to carry them. The servicing case is ours to build; the security assessment stays with the lender.
Where this term takes you
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