A projection of a property's or project's future income, expenses and cash flow, built on stated assumptions and not on past results.
A pro forma answers the question a historical statement cannot: what will this property earn once the plan is carried out? It is the central document for ground-up construction, renovations and any purchase where the buyer expects income to change.
A lender reads it as a set of assumptions, not as a forecast to accept. The OCC handbook calls credible pro forma projections a key determinant of a project’s feasibility and says prudent underwriting reviews whether the assumptions are reasonable given the market and the income and expenses of similar properties. It adds that when key assumptions change, the borrower should give the bank revised projections. For projects with unit sales, the bank should also test the timing of cash in and out, with stress testing.
So show your work. State the rent per unit or per square foot and where it comes from, the vacancy factor, each expense line, and the months to reach stable occupancy. Put the pro forma beside actual results where they exist, and explain every gap. A projection that sits far above comparable properties with no explanation costs credibility on the rest of the package.
How it shows up in the data here
Not in the data. Projections are private and nothing on this site shows them. What the public record does show is who holds construction and land loans, where pro formas carry the most weight: see construction lenders. To turn your own projected income into coverage and loan size, use the DSCR calculator.
Go further
- Maximum loan calculator: Loan size from projected income, coverage and loan-to-value.
- Construction lenders: Banks and credit unions with construction and land loans.
- Maximum loan calculator: The loan each test allows: DSCR, LTV and debt yield side by side, and which one binds.
- DSCR calculator: Cash flow over debt service. Type the cash flow and the loan terms, see the ratio and the cushion before it falls to 1.00x.
- Construction loan package checklist: A construction lender is lending against a building that does not exist yet. The package has to show what it will cost, who will build it, where every dollar comes from, and how the loan gets repaid when it is done.
- How bankers evaluate a commercial loan deal: A credit officer asks one question five ways: how will this loan be repaid, and what happens if it is not? Knowing the five tests lets you size a request before you send it.
- What a lender-ready loan package looks like: A lender decides in minutes whether to keep reading. A package that answers the first five questions on one page, and backs each answer with a document, gets read.
Related terms
- T-12 (trailing 12 months): A property's income and expense statement for the most recent twelve months, usually shown month by month.
- Net operating income (NOI): A property's annual income minus its operating expenses, before loan payments, income taxes and depreciation. It is the top number in DSCR and debt yield.
- As-stabilized value: An appraiser's estimate of what a property will be worth on the future date it is projected to reach stabilized occupancy.
- Lease-up: The period after a building is finished or renovated while it fills with tenants and its income climbs toward a stable level.
- Value-add: Buying an underperforming property and raising its income through renovation, repairs or stronger management. Lenders call it repositioning or rehabilitation.
- Absorption: The pace at which a market leases or sells available space, lots or homes over a set period.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.