How Much Cash Reserves Do You Need for a Commercial Loan?

Six months. That is the answer for a Fiirm small-balance commercial loan — six months of liquid reserves, and the six months is measured in months of the qualifying principal-and-interest payment on the property you are financing, not as a flat dollar figure.

That distinction is the whole subject. Borrowers ask "how much cash do I need in the bank?" and expect a number like $25,000 or $50,000. There is no such number in our guidelines. There is a multiplier. Whatever the qualifying P&I payment turns out to be on your loan, you need six of them sitting in verifiable, eligible accounts — after you have funded your down payment and closing costs, not before.

So the reserve figure is not something you can look up. It falls out of your loan amount, your amortization term, and your rate. A $250,000 loan and a $1.6 million loan on the same building do not carry the same reserve requirement, because they do not carry the same payment.

The six-month standard

Here is the requirement in the guideline's own terms.

Two things worth pulling out of that.

First, "six (6) or more." Six is the floor, not the target. A file that clears six months exactly and clears nothing else comfortably is a thinner file than one carrying nine or twelve months, and our documentation matrix says so directly: additional evidence of liquidity may be required to meet the minimum reserve requirements. Reserves are one of the few places where a borrower can visibly de-risk a file at no cost — the money does not get spent, pledged, or escrowed. It just has to be there and be provable.

Second, the requirement runs to Borrowers and Guarantors, plural. It is not a test of one person's checking account — eligible assets of all Borrowers and Guarantors may be combined, with one condition attached that we cover in the documentation section.

Reserves also sit in the program's core eligibility criteria alongside recourse, minimum FICO, and net worth — listed there as "Post-Closing Liquidity Reserves: 6 months." Post-closing is the operative word. The reserves are what remains after the transaction clears, not what you brought to it.

What six months looks like in dollars

Because the requirement is a multiplier, the dollar figure scales directly with the payment. The illustration below is arithmetic only — the payments shown are assumptions we picked to make the scaling visible, not quotes, and not drawn from the guidelines. Your actual qualifying P&I depends on loan amount, amortization term (we offer 15, 25, and 30-year fully amortizing terms across all property types), and your priced rate.

Same rule, same six months, three very different bank balances. This is why "how much do I need in reserves" cannot be answered before there is a loan amount and a term on the table — and why a borrower who stretches to a larger loan is quietly raising their own reserve bar. Choosing a $900,000 request over a $700,000 one costs you the extra payment, and roughly six months of that extra payment in cash you must prove you still hold after closing.

One more consequence. Because the measure is P&I on the subject property, a longer amortization lowers the payment and therefore lowers the reserve dollar requirement. That is a mechanical result of the rule, not a strategy we are recommending — a 30-year amortization carries its own cost over the life of the loan.

Which assets count, and at what percentage

Liquid financial reserves, per the guideline, include cash and other assets that can be easily converted to cash. But "counted" and "counted at face value" are different things. Some account types are discounted before they touch the reserve calculation.

This is the table, as written:

The retirement line is the one that changes files. A 30% haircut means a $100,000 401(k) statement balance contributes $70,000 toward reserves. The guideline states the same rule from the other direction in its acceptable-sources list: 70% of the balance for retirement savings and cash value of a vested life insurance policy will apply for underwriting purposes.

Beyond the haircut table, the acceptable-sources list is broader than most borrowers expect. Counted toward reserves:

• A cash deposit toward the purchase, where the source is verifiable.
• Checking or savings accounts.
• Investments in stocks, bonds, mutual funds, certificates of deposit, money market funds, and trust accounts.
• Vested interest in IRS-approved retirement or savings plans — 401(k), IRAs, and Section 529 college funds.
• The cash value of a vested life insurance policy.
• A HELOC line of credit from another real estate property. On owner-occupied loans, the payment on that line will be required — meaning it counts against you in the debt analysis even as the availability counts for you here.
• Proceeds from real estate to be sold on or before closing, or from a refinance transaction. A settlement statement will be required.
• Cryptocurrency. It must be converted to U.S. currency and deposited into an eligible asset account, with documentation showing the funds coming from a digital currency account owned by the borrower or guarantor.
• Foreign assets. Permitted, unless the source of funds originated from a country on the Prohibited, Discouraged, or High Risk Country List. We need documented evidence of the foreign asset exchanged into U.S. dollars and held in a U.S. financial institution, plus verification of the funds in U.S. dollars prior to closing.

What does not count

The exclusion list is where files break, because several items on it are things a borrower has already mentally counted.

• Funds or cash that have not been vested and/or seasoned — meaning the source cannot be verified.
• Funds that cannot be withdrawn under circumstances other than the account owner's retirement, employment termination, or death.
• Stock held in an unlisted corporation.
• Non-vested stock options and non-vested restricted stock.
• Personal unsecured loans.
• Proceeds from the sale of non-real-estate assets.
• Cash advances on revolving credit cards or lines of credit.
• Interested party contributions. Interested parties include, but are not limited to, the property seller, builder or developer, real estate agent, broker, or an affiliate who may benefit from the sale of the property or from the sale at the highest possible price.
• Seller, developer, or broker credits of any kind, including advanced rent payments for a seller lease-back.
• Rent credits and sweat equity — labor and materials used to improve the property.
• A loan from the borrower's business, unless it is placed on full stand-by (principal and interest payments) for the term of the loan and the source of funds can be verified.
• SBA Payroll Protection Plan (PPP) proceeds, or any other similar COVID-19-related program funds.

The through-line is borrowed money, and money that benefits someone else in the deal. A credit card cash advance, an unsecured personal loan, a seller credit, and a business loan that is still amortizing all fail the same test: they are liabilities dressed as liquidity. The one carve-out is a business loan on full stand-by for the term — no principal and no interest payments — with a verifiable source.

The cash-out-proceeds rule

This is the branch most borrowers have never heard, and it changes the shape of a cash-out refinance.

Read it precisely, because every clause is doing work.

"Cash-out proceeds may be used for reserves." The money you are pulling out of the building can be the money that satisfies the reserve requirement. You are not required to arrive at closing with six months of P&I sitting in an unrelated account and take cash out on top of it. The proceeds themselves can serve. This is consistent with the haircut table, which lists "Cash from Closing" as an eligible asset type at no haircut, documented by the loan closing statement.

"if FICO > 700." Strictly greater than 700, as written. This is not the program's minimum FICO — the core commercial parameters set a 650 minimum for owner-occupied purchase and cash-out or refinance. It is a separate, higher bar that unlocks this specific treatment. And FICO has a defined meaning in our guidelines: it is reported as the average credit score of all Principals and Key Principals providing a personal guaranty, with each individual's score being the middle of the three tri-merge repository scores, or the lower of two if only two repositories report.

That definition matters with multiple guarantors. A 760 and a 660 average to 710 — above the threshold. Swap the second for a 620 and the average is 690, and the branch closes. Work out the deal FICO before you build a structure on this.

"provided the proceeds equal or exceed the required six months." Partial credit is not described. The rule as written contemplates proceeds that cover the full six-month requirement. It does not say that proceeds short of six months can be blended with other assets to reach the line, and we will not read that permission into it.

How reserves are documented

The evidence standard is short and specific. Two months of immediately preceding statements for bank, securities, and retirement accounts; the current policy statement for cash-value life insurance; the loan closing statement for cash from closing.

For the down payment and closing costs specifically, funds must be documented with the two most recent months of bank statements or a Verification of Deposit form (FNMA 1006) completed by the depository institution.

Our documentation matrix allows a narrow substitution: at least one month of bank statement plus account transaction history covering the second month is acceptable, and where the account issues quarterly statements, one statement is sufficient.

Three sourcing rules apply on top of that, and they cause more conditions than the reserve threshold itself:

1. New accounts and unusually large deposits must be explained and/or documented. The source of funds for newly opened accounts, or for unusually large deposits into existing accounts, has to be sourced.

2. A large deposit can be an aggregate. It could be a single deposit, or multiple deposits over a period of time that in the aggregate result in a large deposit. Splitting a transfer into pieces does not make it disappear.

3. Closing funds must be sourced from the same bank accounts shown in the statements you provided.

There is also a rule that catches borrowers with multiple accounts and multiple guarantors: eligible assets of all Borrowers and Guarantors may be combined, and should be verified at approximately the same time to prevent double counting of funds. If your statements are pulled three months apart, the same $60,000 can look like $120,000 of reserves as it moves between accounts. Pull everything as of the same window.

When reserves are actually verified

There is a specific answer to this, and it is not closing.

The measurement date is the Final Underwriting Approval memo. Practically, that means the window between submission and final approval is the window in which your balances need to hold. A borrower who documents ten months of reserves at application and then drains the account to fund an unrelated equipment purchase two weeks before final approval has changed the file's reserve position at exactly the moment it is being measured.

It also means the closing settlement statement does not get a second look at this number.

Three things people confuse with reserves

Escrow cushion. Tax escrows are required and collected at closing. The escrow cushion is a target balance of two months of the total annual escrow disbursement that must remain in the escrow account after disbursements. That is a servicing balance. It is not your reserves, and it does not count toward them.

Reserves and holdbacks in the loan terms. We may include loan-level credit enhancement features in proposed loan terms — for example, a holdback for reasonable repairs that improve the property, or a principal-and-interest reserve to minimize payment risk. A holdback period may not exceed 180 days. These are deal-specific structures set by underwriting, separate from the six-month liquidity requirement every file carries.

Net worth. Net worth must be at least equal to the loan amount — but that test is required only for loans over $1MM, or when total exposure to one borrower exceeds $1MM, and it is satisfied with a personal financial statement, a recent liquidity statement, or a CPA-certified net worth. Net worth counts illiquid holdings. Reserves do not. Passing one does not pass the other.

What this page does not do

It does not quote you a payment. The six-month figure is meaningless until there is a loan amount, an amortization term, and a priced rate, and none of those get set on a blog page. The dollar illustrations above are arithmetic on assumed payments — not rate quotes, and not drawn from our guidelines.

It does not tell you whether reserves have to be seasoned for a set number of days. The guideline excludes funds that have not been vested and/or seasoned where the source cannot be verified, and it requires sourcing of new accounts and large deposits, but it does not publish a seasoning period in days for reserve assets. We are not going to supply a number it does not state.

It does not address whether the six-month requirement moves for loan size, property type, or documentation program. The requirement is stated at six months across purchase, rate-and-term refinance, and cash-out refinance, and it appears in the core eligibility criteria as six months of post-closing liquidity. If you have heard a different number for a different program, ask us rather than assuming this page overrides it.

And it does not replace a read of your actual file. Reserves interact with the down payment source, the debt schedule, the guarantor structure, and — in a cash-out — the deal FICO. Put the real numbers in front of us.

Guideline SBC 08/03/2026 · Reviewed August 30, 2026

Published August 31, 2026 · Updated August 31, 2026