Commercial Loan Calculator

Let a commercial loan calculator do the math on how much that real estate loan will really cost your business.
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You’ve found the building you love. Maybe it’s a cute repurposed bungalow for your retro boutique. Maybe it’s a cozy restaurant space for your pizza business. Or maybe it’s a light-filled office building for your design firm.

No matter what it is, the only thing that stands between you and that building is that commercial real estate loan you’re applying for. (Okay, maybe not the only thing. Just bear with us.) But do you understand the true cost of that loan?

Factors like term length and interest can dramatically affect the cost of your business real estate loan. Before you take out a commercial real estate loan for your small business, make sure you do the math with a commercial loan calculator.

We’ll show you how.

Using a commercial loan calculator

A commercial loan calculator uses some basic information about your loan to estimate the true cost of your loan, including both the principle (your loan amount) and interest.

You’ll need to input these loan details into your calculator:

  • Loan amount
  • Interest rate
  • Repayment term (in months or years)

Then you can use the loan calculator to see how the total loan cost changes as those various factors change.

For example, let’s assume you’re considering a $300,000 commercial mortgage with an 8% interest rate. Using the loan calculator, you can see that a five-year repayment term makes the total loan cost $364,975.10. But a shorter term of three years changes the total to $338,432.75―saving you thousands of dollars. 

A commercial loan calculator can also estimate your monthly payments. ($6,082.92 for the five-year term or $9,400.91 for the three-year term.)  

It will even show you what percentage of your loan cost goes toward interest and what percentage goes toward the loan principle. (18% goes to interest with the five-year term, and 11% goes to interest with the three-year term.)

Plus, after you’ve done your basic calculation, a commercial mortgage calculator lets you view a loan amortization table. These tables show you how much each payment would cost you for the duration of your repayment term (the amortization period), as well as how much of each mortgage payment goes toward interest on the loan vs. the loan balance.

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What you need to calculate
A commercial loan calculator will ask for your loan amount, interest rate, loan term, and any extra monthly payments you’ll make. It’s okay to estimate on these, but the more accurate the numbers, the better the math.

With these results, a loan calculator can help with all sorts of things, from estimating the total cost of a commercial property loan you’re applying for to comparing the costs of different types of commercial loans.

For example, you might use our commercial loan calculator for the following:

  • Make sure you can afford the monthly payment on a loan
  • See if a longer loan term makes more sense for your business
  • Calculate the maximum interest rate you’re willing to pay
  • Find the right combination of interest and repayment term

Put simply, a loan calculator can help you avoid any nasty surprises later on.

Commercial loan costs

But maybe you’re wondering about how all those factors the calculator uses actually change your loan cost. Well, you’re in luck because in this section, we’re about to get real nerdy about loans.

Loan amount

While most business loans range somewhere between $1,000 and $1 million, commercial real estate loans tend to be quite a lot bigger: from $250,000 or so up to a maximum loan size of $5 million.

Of course, the more you borrow, the more you have to pay back—both because your principal (the amount you borrowed) will be larger and because percentage-based interest and fees will be higher.

So before you apply for that full $5 million, take some time to evaluate how much money you actually need. If you actually need that much to get the office building that will revolutionize your small business, then by all means, go for it. But a smaller loan will have lower costs (if only because 6% of $250,000 is smaller than 6% of $5 million), which could make getting real estate with a lower purchase price more appealing.

Put simply, get a loan that covers your business’s needs while staying within your budget. Don’t take on debt you can’t pay back.

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Down payments
Unlike other business loans, commercial business loans require down payments (just like personal real estate loans). Expect to fork over a minimum of 10% of the loan’s principal as a down payment, though you might see a lender ask for as much as 35%.
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APR

At base, the effect of APR (annual percentage rate) on your loan is simple: a higher APR translates to a higher loan cost. But there’s more you should know about APR.

In fact, let’s clear something up right now: APR and interest rates are not the same thing. Your annual percentage rate is meant to describe the full cost of your loan over a year. That means that interest rates are just one part of APR; loan fees make up the other portion.

So let’s look at interest rates first. Commercial real estate loans have some of the lowest interest rates you’ll find on business loans, in part because the real estate itself serves as collateral for your loan. In fact, you can find commercial loan rates as low as 3%, while they cap out around 15%. Not a bad deal, right?

The interest rate you get depends on a few different things, including your lender, your personal credit score, your business credit rating, and the term length of your loan. But mostly, you just need to know that the more qualified you are as an applicant, the better rate you can get.

But remember, APR is more than interest—it also includes the fees you’ll pay. Commercial loans have all sorts of fees; your loan may include several of these:

  • Origination fees
  • Appraisal fees
  • Loan application fees
  • Survey fees
  • Annual fees
  • Legal fees

So before you close on your commercial business loan, make sure you get a full list of fees from your lender.

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Prepayment
Early repayment can be a great way to reduce your loan cost, but some lenders charge early repayment fees. Talk to your lender to find out how prepayment will affect your loan.

There’s one more tricky thing you need to know about APR: points. Commercial mortgages, much like personal mortgages, sometimes express APR like “6% plus two points,” though obviously the numbers will change. So what are those points?

Put briefly, those points (sometimes called discount points) are extra money you pay at closing to get a discount on your loan rate. And oh, by the way, the discounted rate in the example above is the 6%. The undiscounted rate would probably be 6.5%.

Each point costs 1% of your loan amount. So for example, one point on a $500,000 loan would be $5,000. If you’re offered an APR of 6% plus two points on that loan, that means you’d have to pay $10,000 (two points) to get that 6% rate. The exact discount per point can vary from lender to lender. So again, don’t sign anything without clarifying your APR with your lender.

Term length

Term length is less complicated than APR, so we’ll keep this quick. If you have two loans with the same APR, the loan with the longer term will cost more overall (since you pay interest over a longer time period). On the other hand, the longer loan term will give you lower monthly payments.

Keep in mind that commercial loan term lengths can vary a lot, depending on what kind of real estate you’re buying with your mortgage loan. You’ll commonly see commercial loan terms from 5 to 20 years.

Of course, you can always use a loan calculator to see exactly how term length affects the overall cost of your small-business loan.

Choosing a commercial loan

So now you know how to calculate the true cost of your commercial loan and what the biggest factors are that affect that cost—but how do you actually choose the right small-business loan?

Loan type

First, you need to figure out what type of commercial real estate loan you want―because you actually have a lot of choices.

In fact, here are just a few types of commercial loans:

  • Purchase loans
  • Construction loans
  • Refinance loans
  • Hard money loans
  • SBA real estate loans

 Hopefully, you already have an idea of what kind of commercial loan you want. But if you’re not sure yet, we’ve got a guide to commercial real estate loans that can help you figure it out.

Loan qualifications

Another thing you should know about choosing a business loan? In part, the loan chooses you. What do we mean by that? Simple: You might want a $5 million loan (who wouldn’t?), but if you have a bad credit score and low business revenue, don’t be surprised if every lender turns you down. Your business’s financial health and your own credit history definitely affect which loans are even available to you.

Expect your lender to look at the following:

  • Your personal credit score
  • Your business’s age
  • Your personal net worth
  • Your business’s revenue
  • Your business plan
  • Other debt you have

As you’d expect, a better application can get you a better loan.

Other tips

As with any loan, do plenty of shopping around before committing to anything. Different lenders will offer different commercial real estate loans with their own rates and terms. So you might find that some loans work better than others for your business.

And give yourself plenty of time to get your loan. Real estate loans have some of the longest approval times out there: 60 to 90 days between your application and funding would be typical. You saw that right—that’s two or three months.  So don’t expect to get your commercial real estate loan next week.

Oh, and as you’re shopping for commercial real estate, watch out for fake realtors. It’s a known scam, so make sure you verify your realtor’s credentials before you turn over any money. 

If you’re still hungry for more info about commercial loans, check out our guide to getting commercial real estate loans.

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Lender perks
Some banks offer perks—like discounted interest rates or reduced fees—to existing customers. If you have your business checking account with a bank that offers loans, ask about what they can do for you when it comes to a commercial real estate loan.

The takeaway

As you prepare to purchase real estate, a commercial loan calculator can help you make sure you’re getting a good deal on your loan—and that you can afford it. So before you accept a loan from a lender, always do the math.

Once you understand the real cost of your loan, you can make an informed choice about taking on that debt as a borrower. And if you decide to go through with the financing, you can use your new commercial real estate to grow your company—just like many small-business owners have done before you with their own businesses.

Good luck with your loan!

Getting a business loan to help with working capital or cash flow? Check out our business loan calculator to calculate the true cost of your financing.

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At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Chloe Goodshore
Written by
Chloe Goodshore
Chloe covers business financing and loans for Business.org. She has worked with many small businesses over the past 10 years, from video game stores to law firms. Those years watching frustrated business owners try to sift through their many options gave her a passion for breaking down complex business topics. She wants to help business owners spend less time agonizing over their businesses so they can spend more time running them.
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