Financial Analysis · Reference Card
Commercial Loan & Financing Terms
Financing makes or breaks a commercial deal, and the vocabulary is its own language. This card lays out the loan products you'll actually see, how recourse and structure shift risk, and the prepayment terms that decide what it costs to get out early. Pair it with the CRE Metrics cheat sheet for the sizing math (DSCR, LTV, debt yield) lenders use.
Pro Tip
Always model the refinance, not just the purchase. A 10-year term on a 30-year amortization leaves a large balloon, and if rates are higher or NOI is flat at maturity, the property may not support a loan big enough to pay it off. Underwrite the exit-year DSCR and debt yield before you ever close.
1. Loan Products
Conventional / Bank Permanent
65–75% LTV, 5–10 yr term on 20–25 yr am, often recourse.Balance-sheet loan from a commercial bank.
Agency (Fannie / Freddie)
Up to 75–80% LTV, non-recourse, best rates for 5+ unit multifamily.GSE-backed multifamily debt.
CMBS (Conduit)
Non-recourse, 10 yr / 30 yr am, defeasance prepay, rigid servicing.Loan pooled with others and sold as bonds.
Life Company
Lowest rates, conservative LTV (~60–65%), trophy/stabilized assets.Permanent debt from an insurance company.
SBA 504
Up to ~90% financing, long fixed rate; 51%+ owner-occupancy required.Owner-occupied financing: bank + CDC + borrower.
SBA 7(a)
Up to ~90%; can fold in working capital; often variable rate.Flexible owner-occupied / business loan.
Bridge Loan
75–80% LTC, 1–3 yr, interest-only, higher rate + a rate cap.Short-term loan for transition or value-add.
Construction Loan
65–75% LTC, interest-only, refis to permanent on stabilization.Funds ground-up or major reno, drawn in stages.
Mezzanine / Pref Equity
Higher cost; secured by the ownership interest, not the property.Fills the gap between senior debt and equity.
2. Structure & Recourse
Recourse
Common on bank, SBA, and construction loans.Lender can pursue the borrower's other assets on default.
Non-Recourse
Agency / CMBS / life-co — but subject to carve-outs.Lender's remedy is limited to the property itself.
Bad-Boy Carve-Outs
Read them — they can pierce a “non-recourse” loan.Acts (fraud, bankruptcy, waste) that turn non-recourse debt recourse.
Amortization vs. Term
Longer am = lower payment, bigger balloon at maturity.Term = when it's due; Am = payment schedule
A 10-yr term on 30-yr am leaves a balloon.
Interest-Only (I/O)
Boosts early cash-on-cash; raises refinance risk later.Pay only interest for an initial period.
Reserves / Escrows
TI/LC and capex reserves are common on CMBS and bridge loans.Lender-held funds for taxes, insurance, and replacements.
Assumability
Valuable when the in-place rate beats today's market.Buyer can take over the seller's existing loan.
3. Rate & Prepayment
Index + Spread
Spread reflects risk; rate locks matter in volatile markets.Rate = Index (SOFR / UST) + Spread
Fixed or floating rate built off a benchmark.
Rate Cap
Required on most bridge and floating-rate loans.Buys a ceiling on a floating rate.
Yield Maintenance
Expensive to exit early when rates have fallen.Prepay penalty that makes the lender whole on lost interest.
Defeasance
CMBS standard; costly and operationally complex.Replace the loan's collateral with Treasuries to prepay.
Step-Down
More flexible to exit than yield maintenance or defeasance.e.g., 5-4-3-2-1%
Prepay penalty that shrinks over the term.
Lockout
Common in the early years of a CMBS loan.Period when no prepayment is allowed at all.
Go deeper — free course
This resource is distilled from the MaxLife Academy CRE curriculum. The full lesson walks through every point with examples and the reasoning behind it.
Course 11 — Commercial Financing & the Capital Stack→Pair it with a tool
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