The quick read: A sources and uses statement is a one-page table that lists every dollar a commercial real estate deal needs (the uses: price, construction, fees, reserves) against every dollar that will pay for it (the sources: the loan, your cash, land, seller credits, deferred fees). The two columns must total the same number. Lenders read it to check loan-to-cost, how much real cash equity you put in, and which costs their loan is actually funding.
Rule one: total sources must equal total uses, to the dollar (Corporate Finance Institute, Sources and Uses of Cash Schedule, updated March 31, 2026)
Value for an existing-property purchase: the lesser of the actual acquisition cost or the appraised value (Interagency Guidelines, quoted in the OCC Comptroller's Handbook, Commercial Real Estate Lending, Version 2.0)
Loan-to-cost: the loan divided by the total cost of the property plus all construction costs (OCC handbook glossary)
Bank supervisory LTV limits: 80% for commercial construction, 85% for completed commercial property; banks may make a limited volume of exception loans above them (OCC handbook, Interagency Guidelines table)
Generally not counted as equity by banks: deferred developer's profit, unearned developer fees, incurred overhead, and interest or holding costs accrued on contributed land (OCC handbook)
SBA 504 borrower contribution: at least 10% of project cost, 15% for a business two years old or less or a limited or single purpose building, 20% when both apply (13 CFR 120.910)
This page covers the whole funding table. For the ratio math alone, see how LTC is calculated on a construction loan and the LTV, LTC and ARV guide.
What is a sources and uses statement for a commercial real estate loan?
A sources and uses statement for a commercial real estate loan is a two-column schedule that shows where every dollar of the project comes from and where every dollar goes, with both columns adding to the same total. It is the first page a lender checks, because it shows the loan request, your equity and the costs in one view.
The Corporate Finance Institute describes a sources and uses schedule as a summary of where capital will come from and what it will be spent on, and states that the two totals should equal each other. In real estate lending the same schedule becomes the deal's funding plan. The uses column lists the purchase price or land cost, construction or renovation costs, closing costs, lender fees, and any reserves the loan requires. The sources column lists the senior loan, any mezzanine or preferred equity, your cash, land you already own, and credits such as a seller credit or a deferred developer fee.
If the columns do not balance, something is missing: an unfunded cost, an overstated loan, or equity you have not identified. A lender will find the gap during underwriting, so it is better to find it first.
What goes on each side of a sources and uses statement?
The uses side lists every cost needed to close and complete the project, and the sources side lists every dollar that will pay those costs, split between money the lender advances and money you must bring. A clean statement shows each line once, ties to a contract or budget, and labels who funds it.
Uses usually fall into five groups. First, the acquisition: purchase price or land cost. Second, hard costs: the OCC handbook defines these as site improvements, building construction, general conditions, the general contractor's fee, and contract items such as bonding and contractor insurance. Third, soft costs: interest and other development costs such as fees and predevelopment expenses, plus related-party costs such as a developer fee if they are reasonable against third-party pricing. Fourth, closing costs and lender fees. Fifth, reserves: an interest reserve, a capital expenditure holdback, a contingency, or tax and insurance escrows.
The handbook also lists what should stay out of a bank construction budget: interest or preferred returns owed to equity partners or subordinated lenders, the developer's general corporate overhead, and selling costs to be paid from sales proceeds, such as brokerage commissions.
Which uses a lender will fund is set by its own loan agreement, not by a market rule. The OCC handbook notes that an interest reserve is usually funded through a budget line in the construction loan, but can instead be funded by the borrower into a separate escrow as a loan condition. For SBA 504, 13 CFR 120.882 lists eligible project costs, including a construction contingency of up to 10% of construction cost, professional fees such as title, appraisal, environmental and architectural work, and repayment of interim financing including points, fees and interest.
How do lenders read a sources and uses statement?
Lenders read a sources and uses statement as an equity test: they divide the loan by total cost to get loan-to-cost, divide it by value to get loan-to-value, and then check how much of your contribution is real cash that went in first. Credits, deferred fees and land values get the hardest look.
The OCC handbook says prudent policies set loan limits as a maximum percentage of cost as well as of market value, so the borrower contributes enough equity. It defines loan-to-cost as the loan divided by the total cost of the property plus all construction costs. For a purchase of existing property, the Interagency Guidelines define value as the lesser of the actual acquisition cost or the appraised value, so paying under appraisal does not raise the loan on a bank deal.
Timing matters as much as amount. The handbook says a bank's policy should require equity to be contributed before construction loan disbursements begin, and that deferring equity can significantly increase completion risk. It lists common equity types as cash, marketable securities, land purchased with cash, and costs the developer paid up front, such as architect and engineering fees and permits. It also says deferred developer's profit, unearned developer fees, incurred overhead, and interest or holding costs on contributed land are generally not considered equity.
Contingency is read the same way. The handbook says contingency allowances usually range between 5 and 10 percent of the overall budget, and that overruns caused by poor projections would ordinarily be covered by the borrower, not by the loan's contingency line.
Which lender types size off cost and which size off value?
Lender types split on what the loan is measured against: construction and SBA 504 lenders size mainly against total project cost, while bank acquisition loans on existing property are measured against value, defined as the lesser of price or appraisal. Bridge lenders set their own basis, and bank policies typically set limits on both cost and value.
Table: How lender types size a commercial real estate loan (framework, dated sources)
| Lender type | Sized mainly on | Dated public reference | Source and date |
|---|---|---|---|
| Bank, construction loan | Loan-to-cost and loan-to-value, whichever is lower | 80% supervisory LTV for commercial, multifamily and other nonresidential construction; policy should set LTC as well as LTV limits | OCC Comptroller's Handbook, CRE Lending, Version 2.0 (March 2022; reputation-risk edits March 20, 2025) |
| Bank, purchase of existing property | Value, defined as the lesser of acquisition cost or appraisal | 85% supervisory LTV for completed commercial property | Same OCC handbook, Interagency Guidelines table |
| SBA 504 | Total project cost | Borrower contributes at least 10%, 15% or 20% of project cost; third-party loans at least equal the 504 loan, and at least 50% of cost for a new business or limited or single purpose asset | 13 CFR 120.910 and 120.920, eCFR as of October 1, 2026 |
| Bridge or private lender | Cost and as-is or as-stabilized value, by lender policy | No dated public benchmark found; quoted per deal | Ask each lender for its sizing basis in writing |
The supervisory figures are limits, not typical terms: banks set their own internal limits at or below them and may make a capped volume of exception loans above them. The bridge row carries no number because no allowlisted primary source publishes one by lender type.
What does a sources and uses statement look like for a stabilized acquisition?
A sources and uses statement for a stabilized acquisition is the simplest version: the purchase price plus closing costs, lender fees and escrows on the uses side, and the senior loan, any seller credit and your cash on the sources side. The figures below are illustrative, not a real transaction or a quote.
Table: Illustrative stabilized acquisition (all figures hypothetical)
| Uses | Amount | Sources | Amount |
|---|---|---|---|
| Purchase price | $4,000,000 | Senior loan (65% of price) | $2,600,000 |
| Title, legal, appraisal and third-party reports | $60,000 | Seller credit at closing | $50,000 |
| Lender fees | $26,000 | Borrower cash equity | $1,500,000 |
| Tax and insurance escrows | $40,000 | ||
| Working capital reserve | $24,000 | ||
| Total uses | $4,150,000 | Total sources | $4,150,000 |
Illustrative appraisal: $4,200,000
Value used by a bank: $4,000,000, the lesser of price and appraisal
Illustrative loan-to-value: $2,600,000 divided by $4,000,000, which is 65%
The $200,000 gap between price and appraisal does not add loan proceeds on a bank deal, because the guidelines use the lower number. How a seller credit is treated, as cash to you or as a reduction of the price used for sizing, is lender-specific; ask before you sign the contract.
What does it look like for a value-add bridge loan with a capex holdback and interest reserve?
A value-add bridge sources and uses statement adds two loan-funded uses that sit on both sides: a capital expenditure holdback the lender releases in draws as work is done, and an interest reserve that pays debt service during the business plan. Your equity covers what the loan does not. All figures below are illustrative.
Table: Illustrative value-add bridge loan (all figures hypothetical)
| Uses | Amount | Sources | Amount |
|---|---|---|---|
| Purchase price | $6,000,000 | Bridge loan, funded at closing | $4,200,000 |
| Capex holdback (renovation budget) | $1,200,000 | Bridge loan, capex holdback in draws | $1,200,000 |
| Interest reserve | $450,000 | Bridge loan, interest reserve | $450,000 |
| Closing costs and lender fees | $150,000 | Borrower cash equity | $1,950,000 |
| Total uses | $7,800,000 | Total sources | $7,800,000 |
Illustrative total loan commitment: $5,850,000
Illustrative loan-to-cost: $5,850,000 divided by $7,800,000, which is 75%
Illustrative cash at closing: $1,950,000, covering $1,800,000 of the price plus $150,000 of closing costs
Two points change the cash you need. First, the holdback is not cash to you at closing; it funds only against completed work, so you carry the contractor until each draw clears. Second, the OCC handbook says interest reserves are generally not appropriate on loans that should already generate cash flow, such as stabilized properties, which is why a reserve belongs in a value-add or construction plan rather than a stabilized purchase. Run your own version in the deal analyzer.
What does it look like for ground-up construction with a land contribution?
A ground-up construction sources and uses statement lists land, hard costs, contingency, soft costs, a developer fee, an interest reserve and loan costs as uses, then funds them with the construction loan, land you already own, cash equity and any deferred fee. How the lender credits the land decides your cash requirement. Figures are illustrative.
Table: Illustrative ground-up construction with a land contribution (all figures hypothetical)
| Uses | Amount | Sources | Amount |
|---|---|---|---|
| Land (owned, at cost) | $1,500,000 | Construction loan (65% of cost) | $7,800,000 |
| Hard costs | $8,000,000 | Land contributed at cost | $1,500,000 |
| Hard-cost contingency (5% of hard costs) | $400,000 | Borrower cash equity | $2,400,000 |
| Soft costs: design, permits, legal, insurance | $900,000 | Deferred developer fee | $300,000 |
| Developer fee | $300,000 | ||
| Interest reserve | $700,000 | ||
| Loan fees and closing costs | $200,000 | ||
| Total uses | $12,000,000 | Total sources | $12,000,000 |
Illustrative loan-to-cost: $7,800,000 divided by $12,000,000, which is 65%
Illustrative equity counted by a bank: $3,900,000 (land at cost plus cash), because the OCC handbook says unearned developer fees are generally not equity
Illustrative land appraisal: $2,000,000, a $500,000 difference from cost that some lenders credit and others do not
The OCC handbook says a developer fee typically does not exceed 4 percent of project cost, and that the developer's profit should be funded from sales, completion and lease-up, or term financing rather than during construction. It also lists land purchased with cash and up-front design and permit costs as common equity, so keep the receipts. Whether land is credited at cost or appraised value is lender-specific, and interest or holding costs on that land are generally not equity.
How does the statement reconcile with the purchase contract and budget?
A sources and uses statement reconciles when every use ties to a signed document: the purchase price and credits to the purchase contract, hard costs to the contractor's bid or contract, and soft costs and the developer fee to the line-item budget. Any number without a document behind it is the one a lender questions first.
The OCC handbook says developers typically give the bank a detailed line-item budget with plans, schedules and geotechnical reports, and that a qualified reviewer should assess it. Its examiner checklist asks whether cost budgets show the amount and source of the owner's equity and include a contingency for costs outside the contractor's agreement. It also warns about front loading, where a builder overstates early-stage costs, which leaves too little loan money to finish.
In practice, check four things before you send it. The price matches the contract, net of any credits. The hard-cost line matches the bid, with contingency shown separately. The interest reserve covers the full construction and lease-up period you are projecting. And the equity line names its source and when it goes in, since the handbook expects equity before the first draw.
Does your sources and uses statement balance?
Your sources and uses statement balances when both totals match, every use ties to a contract or budget, and every equity dollar is real cash or acceptable land that goes in before the first draw. If it does, it is ready to send to lenders; if it does not, fix the gap first.
YieldStack is a commercial mortgage brokerage, not a lender. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed. Submit your deal with its sources and uses, and the brokerage will match it against 20,000+ loan programs.
The bottom line
A sources and uses statement lists every project cost against every funding source, and both totals must match. Lenders use it to test loan-to-cost and loan-to-value, confirm your equity is real and goes in first, and see which costs their loan funds. Tie each line to a contract or budget, and label what you fund versus what the lender funds.