Banks rarely lend the full value of the assets you offer as security. The loan-to-value ratio (LTV) caps the loan at a percentage of the collateral’s value, with the gap acting as a cushion if the bank ever has to sell it. Use this calculator to see your LTV, the most a bank may lend against your collateral and any shortfall.
Estimates only. Lenders use their own methods, rates and fees. Results update as you type; nothing you enter leaves your browser.
LTV formula
- LTV = loan amount ÷ collateral value × 100
- Maximum loan = collateral value × maximum LTV %
- Extra collateral needed = shortfall ÷ maximum LTV %
Worked example
A business wants to borrow $250,000 against a commercial property valued at $300,000. Its LTV would be 83.3%. If the bank lends up to 70% against commercial property, the maximum loan is $210,000, leaving a $40,000 shortfall. To close it with more property of the same type, the business would need to pledge about $57,000 of additional value ($40,000 ÷ 70%).
Typical LTV limits by collateral type
The percentages below are common starting points for SME lending. Actual limits depend on the lender, the country, the condition of the asset and how easily it can be sold.
- Cash or fixed deposits: 90% to 100%
- Residential property: 70% to 80%
- Commercial property: 60% to 75%
- Trade receivables: 70% to 80% of eligible invoices, usually under 90 days old
- Vehicles: 50% to 70%
- Plant and machinery: 40% to 60%, lower for specialised equipment
- Inventory: 30% to 50%, lower for perishable or fashion stock
Why the discount? If the loan defaults, the bank must sell the asset, often quickly and at a discount, and pay legal and selling costs. The margin also protects against the asset losing value over the loan term. The full explanation is in collateral and loan-to-value.
Frequently asked questions
Which value does the bank use?
Usually a fresh valuation by a bank-approved valuer, often the forced-sale value rather than open market value, which can be 15% to 30% lower. Use a conservative figure here.
Can a personal guarantee replace collateral?
Sometimes it supports a small shortfall, but banks rarely treat it as a substitute for tangible security. Understand what you are signing: personal guarantees explained.
Does a low LTV guarantee approval?
No. Collateral is a fallback. The bank first needs to see that cash flow can repay the loan, which is why DSCR is tested before security.
These figures are estimates for planning. They are not financial advice or an offer of credit. See our disclaimer.