Commercial Building loan terms - Posted by Ching Lee

Posted by DMcGehee.SF on April 15, 2009 at 21:59:04:

It really depends on a number of factors. The “typical” financing terms are greatly influenced by the lender’s target market, property type, asset class/quality, access to capital etc.

That being said, here is how the bank that we primarily work with structures cre deals:

  • 5 or 7 year fixed. 1 mo LIBOR, 6 mo LIBOR, 1 yr T. Spreads range. No Prime.
  • 10 year terms
  • 25 yr AM
  • 2% Prepay Penalty in yr 1. Then 1%/4yr

Even in the past three months I’ve seen the terms change dramatically. Spreads are still awfully wide (compared to what banks are borrowing at), spread for add’l fixed period is widening 10-15bps, banks are pricing up for anything over 10yrs (if they offer) etc. The terms you listed above seem completely reasonable but totally depends on the risk of the deal.

Commercial Building loan terms - Posted by Ching Lee

Posted by Ching Lee on April 15, 2009 at 18:59:37:


What is the norm for commercial financing term from the bank ?

20 year amortization, first 5 year fix rate at 6.5% and then prime + 1 % for the rest of the 15 year. 5% prepayment penalty for the first year declining 1% a year to par. No prepayment penalty for borrower internal generated cash to prepay principal.

Is this normal for commercial building loan. Different from home loan where it is a fix rate for 20 or 30 year …

Whats your experience ??



Re: Commercial Building loan terms - Posted by Warren

Posted by Warren on April 22, 2009 at 07:16:48:

I am a banker of commercial business and that is normal for commercial loans. If you look hard you could find someone to give you a 25yr Amortization with a 10yr fix at about the same rate and prepayment let me know if you need any direstion in this ??? but in this climate the most important thing is getting a loan and closing it – if you are making money don’t worry about the rate that much – once you have the building you can always refinance to a better deal