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You've found a warehouse across town, and you're ready to put an offer down. But before you sign anything, you need to know the numbers.
I've been working with small and midsized businesses (SMBs) for most of my career, and the most common question I get asked is always, “What does this cost me every month?” That's why Clarify Capital created a commercial real estate funding calculator to take some of the guesswork out of the process.
Enter the loan amount, rate, and timeline below. Then we'll calculate your monthly payment and total interest. I'll also go over what your results mean and which loans fit which deals.
How To Use the Calculator
Here's what you need to enter to find out your details.
Loan amount. This is the amount that you'll borrow after your down payment. It's not the price of the property.
Interest rate. This is the rate that the lender quotes you. If you're still looking around, try a few different interest rates to see the spread.
Amortization period. This is the total number of years the payment schedule stretches. Longer periods typically mean a smaller payment, but more total interest.
How often you pay. Commercial real estate loans typically bill monthly, so a 25-year schedule works out to about 300 payments.
Start date. This is the month that your first payment is due. It sets the payoff date and the rest of the dates on the schedule.
What Your Results Mean
Your results return six pieces of information, each answering a different question about your loan.
Monthly payment
This is what you'll pay every month. Make sure it fits your cash flow.
Total payments
This incorporates principal and interest across the full schedule to show you the real cost of the property.
Total interest paid
This is the cost of borrowing, or what you'll pay on top of the loan amount.
Balloon payment
This is a large balance you'll owe if the loan term ends before the payment schedule.
Amortization schedule
This gives you an idea of how each payment splits between principal and interest over time.
Payoff date
This is the date that your last scheduled payment clears.
How the Rate Changes a $1,000,000 Commercial Loan
Here's a simple example so you can see how the math works out on a $1 million loan with a 25-year schedule.
| Interest rate | Monthly payment | Total interest over 25 years | Balance due at year 10 |
|---|---|---|---|
| 6.75% | $6,909 | $1,072,735 | $780,771 |
| 9.75% | $8,911 | $1,673,412 | $841,201 |
The Two Ratios That Decide Approval
The debt service coverage ratio (DSCR) and loan-to-value (LTV) ratios help decide approval. Here's what they mean. Both of these ratios exist because commercial lenders secure the loan with the property.
| Ratio | What it measures | What lenders look for |
|---|---|---|
| Debt service coverage ratio (DSCR) | If the property makes enough to cover the loan payment | 1.20 or 1.25 on stabilized property |
| Loan-to-value (LTV) | The amount you're borrowing against the appraised value of the property | Bank rules cap completed commercial property at 85%, and many lenders set an internal limit below that |
What Business Owners Use Commercial Real Estate Loans For
You can use a commercial real estate loan a couple of different ways. Here are the three most common.
You want to buy the building you operate from.
U.S. Small Business Administration (SBA) loans can be a useful option in this case. The 7(a) and 504 programs cover owner-occupied property. This means your business uses at least 51% of an existing property.
Refinancing a commercial loan.
You may decide to refinance because rates dropped, you want to pull equity out, or pay a balloon payment.
Covering expenses.
Working capital costs such as fit-out, renovation, and expensive closing costs can all be covered with financing like a short-term loan.
Clarify Capital arranges SBA loans for owner-occupied properties. We also arrange working capital that surrounds a purchase (term loans, business lines of credit, equipment loans).
We don't arrange commercial real estate financing. Those loans typically come from banks and credit unions. You can still use our calculator to run those numbers.
Minimum Qualifications
$10,000 in monthly revenue
Your business must earn at least $10K per month in a business bank account.
500+ credit score
You can get approved with any credit score. But the better your credit rating, the better interest rates lenders offer. Your FICO score should be above 500.
Minimum six months in business
Your company should be operational for a minimum of six months. This shows business lenders that your company is sustainable and won't go out of business.
Have a business bank account
Your Clarify advisor will need three or four months of your most recent bank statements to verify income. This is just to see you're actually making $10K+ month in revenue.
Other Financing To Consider
Commercial mortgages aren't always the right fit. Here are five other loan options to consider.
Term loans
You receive a lump sum and repay it on a fixed schedule. These loans can be used for renovations or fit-out.
Business line of credit
You draw against this revolving line of credit as needed. Pay interest only on what you use.
SBA loans
These are government-backed loans that run up to $5 million with terms of 10 to 25 years. Closing typically takes longer, but monthly payments are low.
Equipment financing
Finance up to 100% of the equipment value and repay it over 12 to 72 months. The equipment serves as collateral.
Home equity line of credit (HELOC)
HELOCs allow you to draw against the equity in your home, which serves as collateral. HELOCs can be used to cover the down payment on a property.
Run Your Real Numbers
If a commercial mortgage isn't the right fit, but you still need financing, SBA loans may be a good option for owner-occupied properties. If you need financing to cover a gap, renovations, or a fit-out, term loans could be a fit.
Apply today with Clarify Capital to see what you qualify for. Checking your options won't impact your credit.
FAQs on Commercial Real Estate Financing
Here are straight answers to the most common questions on commercial real estate financing.
What Does the Payment on a $1,000,000 Commercial Loan Depend On?
It depends on four things: interest rate, amortization period, how often you pay, and whether there's a balloon payment. At an interest rate of 6.75% over a term of 25 years, a $1,000,000 loan runs about $6,909 a month. At an interest rate of 9.75%, the same loan costs about $8,911 a month.
What Is the Current Interest Rate on a Commercial Real Estate Loan?
Rates move with the market. Right now, the bank prime rate is 6.75%. SBA caps 7(a) rates at the prime rate plus 3% on loans over $350,000. Right now, that puts that ceiling at 9.75%. Commercial mortgage rates follow Treasury yields, and the 10-year Treasury is at 4.70% right now.
How Do You Calculate a Commercial Loan?
It's calculated using a standard amortization formula:
Payment = P × r ÷ (1 − (1 + r)⁻ⁿ)
To run this yourself, P is how much you borrowed, r is the monthly interest rate, and n is the number of payments you'll make.
What Type of Loan Fits Commercial Property?
It depends. SBA loans can be used for owner-occupied properties under $5,000,000. Conventional commercial mortgages from banks can be used for investment properties. Other financing, such as bridge loans or hard money financing, can also be used for deals that need to close quickly. Short-term loans and business lines of credit can also be used to cover gaps.
Is My Information Secure When I Apply With Clarify Capital?
Clarify Capital follows SOC 2 security principles. Our application collects only what a lending advisor needs to match you with lenders in our network. We don't sell your information.
Bryan Gerson
Co-founder, Clarify
Bryan has personally arranged over $900 million in funding for businesses across trucking, restaurants, retail, construction, and healthcare. Since graduating from the University of Arizona in 2011, Bryan has spent his entire career in alternative finance, helping business owners secure capital when traditional banks turn them away. He specializes in bad credit funding, no doc lending, invoice factoring, and working capital solutions. More about the Clarify team →
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