Commercial Loan Rates

Interest Rates
August 2016

  • The majority of commercial loan rates utilized by the banks are tied to the Bond/Treasury markets, Prime and LIBOR indexes

  • Interest rates below include the bank margin/spread

  • Pricing adjusts as we receive them from the lenders

  • Loan payment here

Conventional Financing

Commercial loan rates below are based on a 5 yr fixed program, "B" property, "B" location.

Commercial: 3.500%
Apartments: 3.500%
Owner User/SBA: 4.000%
Hard Money: 8.000%
Bridge Loans: 8.000%
ARM: 4.250%

Commercial loan rates and terms are pretty straight forward regardless of the commercial property type.

For the most part, they are a short term fixed (3yrs - 10yrs) and then they convert to an adjustable loan for the remainder of the term.

We won't confuse you with a convolution of loan products, terms, rates, etc. These are the basic platforms for the short term fixed programs. They will however come with a slight twist from lender to lender.

These are the most dominant loan products in the commercial lending industry with the exception to SBA loans.

If there are 2 components of the loan that will make the difference of which lender you are going to do business with...

These most likely would be..."Rate & Prepayment Penalty"

Here is how you can ballpark the rates for the 3, 7, 10, year fixed programs working off of the 5 yr rates shown in the table above;

Scale up or down starting at the 5 year fixed rate.

  • 3 yr fixed: subtract .25 bps
  • 7 yr fixed: add .25 bps
  • 10 yr fixed: add .50 bps

Keep in mind the above "add-ons" will only give you a ballpark rate. But your realistic interest rate will not be far off. It shouldn't hurt your cash flow proforma unless your margin of error is tight.


Most commercial banks will set the initial fixed rate internally and use a margin or spread to set the new rate when the loan converts from fixed to adjustable.

On the popular 3,5,7,10 fixed programs, you'll find the margin/spread in a range of 2.35 bps to 3.00 bps. This spread will be added to a pre-determined index at the time of conversion.

eg; 2.40 bps + 3.725 (12 MTA index)= 6.125%

So, 6.125% would be your adjustable rate at conversion

Property Grade...

Unfortunately, properties are not treated least not in the eyes of the bank.

With many lenders, commercial loan rates are placed on a property scale of A - D (we've never heard of an "F"...yet).

e.g.; "A" properties get the best rates and "D" the less favorable.

Property grade is determined by location, condition, aesthetics, etc.

The average property grade that we see funded is in the "B" and "C" class.

Prepayment penalites... for the most part, are scale down depending on the fixed term.

Loan term Prepay
ARM 1,1,1
3 yr fixed 3,2,1
5 yr fixed 3,2,1,1
7 yr fixed 5,4,3,2,1,1
10 yr fixed scale down
or yield maintenance


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