UNDERWRITING GLOSSARY
Reserve
Reserve Account
Funds set aside for future obligations or risk protection.
What does Reserve mean?
Funds set aside for future obligations or risk protection. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Reserve in context
A lender may require six months of debt service in reserve.
Why it matters in financing
Reserve can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related underwriting terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.