RIO Mortgage & Realty

310.591.8074

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Financing Commercial Loans

RIO Commercial mortgage brokers find financing for a wide variety of commercial property types and financing needs. We work to find the best conduit or company financing for stable, high quality, low risk real estate. We work to find great bank financing for owner occupied and investment properties. And, we work to find the best hard money financing for projects that for some reason can't qualify for conventional financing.

Commercial loan financing offers a greater degree of flexibility than other loan alternatives, allowing for reasonable underwriting as well as exception based approvals.

RIO Commercial offers expertise in locating and placing the ideal long-term financing for commercial properties including, retail, office, industrial and mixed-use properties. Your loan request is presented to several lenders. RIO Commercial will find lenders which are willing to compete for your loan. Each commercial lender has a slightly different need for their portfolio at any single time. We find the lenders who are looking for a project just like yours.

Characteristics of Commercial Property Financing Terms
(e.g. retail, industrial, office)

Maximum loan to value:

Most lenders will loan up to 75% of value or cost (whichever is lower).

For loans under $2M, there are a few lenders who will go to 80% or 90% or will allow secondary financing for a combined loan to value of 85% to 90%.

For long term fixed rate loans a small "mezzanine" piece can be added to the loan to yield an 80% to 85% LTV.
Debt service coverage:

The cash flow from operations must be at least 1.25 times the mortgage payment.
Term:

5, 10, 15 year terms are most common.
Amortization:

20, 25 or 30 years if building is in good repair. Typically 15 and 20 year loans are full amortizing.
Typical Rates:
  • 10 year fixed = 10 yr US Treasury bill rate + 1.1% to 2.0%
  • 15 and 20 year fixed = 10 yr Treasury + 1.6% to 2.5%>
  • 5 year fixed = 5 yr Treasury + 1.6% to 2.5%
  • ARM = LIBOR + 1.7% to 2.5%
Prepayment terms:
  • 10 year fixed rate loans - typically have prepayment based on "yield maintenance" or "defeasance". This kind of prepay can make it prohibitive to refinance or sell the property (prepayment fees can easily exceed 10% to 15% of the loan).
  • 5 yr fixed rate loans - typically have a decreasing prepayment each year (e.g. 5%, 4%, 3%, 2%, 1%).
  • Adjustable rate loans - typically have a decreasing and smaller prepay (e.g. 3%, 2%, 1%).
Allowable vacancy:

Generally lenders expect the vacancy to be near the local market vacancy. This is generally in the 5% to 10% range.
Recourse:

Longer term loans (typically from life insurance companies or conduits) are generally non-recourse. Bank loans are typically recourse.
Closing costs:

Borrowers are responsible for all due diligence and closings costs (e.g. Appraisal, Phase 1 Environmental, site inspection, title, etc)

  • Loans under $3M - costs range from $6,000 to $12,000
  • For loans over $3M - costs can be $20,000 or more

** These are NOT terms of any specific lender and merely a representation of terms most often used in the marketplace. Do not rely on the above as a commitment to provide any specific terms on any specific deal. **

Speak with a RIO Commercial Real Estate Financing Expert
Call 310.593.4738 or E-mail dmoran@riomortgage.net