This tool figures payments on a commercial property, offering payment amounts for P & I, Interest-Only and Balloon repayments — along with providing a monthly amortization schedule. This calculator automatically figures the balloon payment based on the entered loan amortization period. If you instead want to calculate for a known ending balloon payment, please use our balloon loan calculator.
Getting a commercial loan for your business can be an intimidating process. Between all the paperwork, legal jargon, and huge numbers being thrown around, it’s easy to feel overwhelmed. One of the most confusing parts of a commercial loan is understanding the amortization table.
An amortization table lays out how each payment on your loan will be applied towards interest and principal over the full repayment term While amortization tables look complicated at first glance, they contain valuable information that can help you make smart borrowing decisions Read on to learn what commercial loan amortization tables are, why they matter, and how to decipher them.
What is a Commercial Loan Amortization Table?
An amortization table is a schedule that shows the breakdown of every payment on a commercial loan. It details how much of each payment goes towards interest vs principal over the life of the loan.
With a commercial loan the payments are usually structured so that in the early years most of each payment goes to interest. As the loan progresses, more of the payment is applied to principal. The goal is to have the loan paid off completely by the end of the repayment term.
Amortization tables allow borrowers to see exactly how their debt will be repaid over time. Lenders use amortization tables to calculate payments that will pay off the loan within the set timeframe. The tables demonstrate how the principal loan balance decreases with each subsequent payment.
Key Elements of a Commercial Loan Amortization Table
Commercial loan amortization tables include several key data points:
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Payment number – This shows which payment you’re looking at in the full repayment schedule. It starts at 1 and increases by 1 with each subsequent payment.
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Payment amount – The amount due for that particular payment. This remains the same for each payment in a fixed-rate loan.
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Date – The due date for that payment. Many commercial loans require monthly payments.
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Interest portion – How much of that payment goes towards interest charges. This decreases over time.
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Principal portion – The amount of the payment applied to the original loan principal. This increases as the loan is paid down.
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Total payment – Interest + principal amounts. This normally remains constant.
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Remaining balance – How much you still owe on the loan after that payment. This goes down as more principal is paid off.
Why Commercial Loan Amortization Tables Matter
Amortization tables are an important tool for commercial borrowers because they allow you to:
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See exactly how much interest you’ll pay over the life of the loan. You can compare interest costs between lenders.
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Verify that the loan will be fully paid off by the end of the term and there won’t be any surprises.
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Track your equity over time. As more principal is paid off, your equity in the property or project increases.
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Project how much cash flow will be available in future years once less interest is being paid.
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Calculate penalties for early payoff. You’ll know exactly how much principal remains if you want to pay the loan off early.
How to Read a Commercial Loan Amortization Table
Learning how to read an amortization table is like learning a new language. But once you grasp the basic terminology and layout, it becomes much less intimidating.
Start by identifying the key elements listed above – payment number, payment amount, date, interest paid, principal paid, total payment, and balance. Then look at the first month’s payment row. You’ll see that in month 1, a large portion goes to interest, while only a small sliver goes to principal.
As you move down the rows, you’ll notice the interest portion gets smaller each month while the principal portion gets larger. That’s because there’s less interest to charge each month as the principal declines.
Focus on the remaining balance column to see the loan being paid down month by month. By the final payment, the balance reaches zero meaning the loan is fully repaid. That final payment will be nearly all principal since the interest has mostly been paid off.
Pay attention to irregularities in the numbers or formatting as this could indicate amortization errors. If you notice anything strange, request clarification from your lender.
Tips for Analyzing a Commercial Loan Amortization Table
Here are some tips for digging deeper into your amortization table:
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Calculate the total interest paid over the loan term by adding up the interest column. Is the interest rate competitive?
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Look for large jumps in the principal from one month to the next. This could mean a balloon payment is required.
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Review the principal reductions in later months/years. Is enough equity being built?
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Confirm the final payment brings the remaining balance to zero.
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Make sure the payment amounts match what is in your loan documents.
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Plug the numbers into an online amortization calculator to check accuracy.
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Look for odd patterns that could be a sign of errors.
Getting comfortable working with amortization tables takes some practice. Don’t be afraid to ask your lender questions if you’re unsure how to interpret any part of your table.
Options for Adjusting Your Amortization Schedule
One benefit of understanding your amortization is realizing you do have options for adjusting the repayment schedule if needed. Some choices include:
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Refinancing – Taking out a new loan with better terms. This resets the amortization timeline.
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Recasting – Making a large lump sum payment to reduce your principal balance. Future payments are recast based on the new balance.
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Balloon payment – Arrange a loan with lower payments for several years then one large payment to pay off the balance.
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Extended term – Increase the length of the repayment period to lower your monthly dues.
Discuss any of these options with your lender if your business needs more flexibility. Just be aware that each change also affects your total interest costs.
Sample Commercial Loan Amortization Table
Reviewing a sample amortization table is helpful for seeing how one is structured. Here is an example 30-year amortization schedule for a commercial loan:
| Payment # | Payment Amount | Date | Interest Paid | Principal Paid | Total Payment | Remaining Balance |
|---|---|---|---|---|---|---|
| 1 | $7,416 | 1/1/2022 | $5,000 | $2,416 | $7,416 | $497,584 |
| 2 | $7,416 | 2/1/2022 | $4,979 | $2,437 | $7,416 | $495,147 |
| 3 | $7,416 | 3/1/2022 | $4,951 | $2,465 | $7,416 | $492,682 |
| … | … | … | … | … | … | … |
| 24 | $7,416 | 1/1/2023 | $4,633 | $2,783 | $7,416 | $470,528 |
| … | … | … | … | … | … | … |
| 288 | $7,416 | 12/1/2044 | $712 | $6,704 | $7,416 | $3,296 |
| 289 | $7,416 | 1/1/2045 | $27 | $7,389 | $7,416 | $0 |
This shows a $500,000 loan at a 5% interest rate with a 30-year term and monthly payments. In month 1, most of the $7,416 payment goes to interest, while the remaining $2,416 goes to principal reduction. But by the end, the payments are nearly all principal since the interest portion has been mostly paid off.
The remaining balance steadily declines until the final payment eliminates the rest of the principal balance. This sample illustrates how amortization gradually pays off the loan over its full term.
Amortization Tables Help You Borrow Smarter
Don’t let amortization tables intimidate you. Learning how to analyze them is key to making informed borrowing decisions for your business. Amortization gives you visibility into exactly how your loan will be repaid over time so there are no surprises.
Arm yourself with knowledge by requesting amortization schedules from all lenders and reviewing the terms thoroughly. Compare interest costs, equity buildup, total payments, and other factors. This will ensure you select the most favorable loan structure and payment schedule for your needs.
While amortization tables seem complex at first, a bit of education can help you decipher them quickly. You’ll gain the confidence to borrow strategically and secure the financing needed to drive business growth. So tackle those amortization tables head on!
Conduit or CMBS Loans
A conduit loan, also called a commercial mortgage backed security (CMBS) loan, is a kind of commercial real estate loan backed by a first-position mortgage. Conduit loans are pooled together with a diverse set of other mortgages. Then, they are placed into a Real Estate Mortgage Investment Conduit (REMIC) trust and sold to investors. Each sold loan carries a risk equivalent to its rate of return. This type of loan is also used for properties such as retail buildings, shopping malls, warehouses, offices, and hotels.
Conduit loans can provide liquidity to real estate investors and commercial lenders. They are package by conduit lenders, commercial banks, and investment banks. These loans usually come with a fixed interest rate and a balloon payment by the end of the term. Some lenders also allow interest-only payments. Conduit loans are amortized with 5, 7, and 10-year terms, as well as 25 and 30-year terms.
The Small Business Administration (SBA) offers guaranteed commercial loans to qualified applicants. The SBA is a federal agency dedicated to aid businesses in securing loans. They help reduce default risk for lenders and make it easy for business owners to access capital. The SBA does not lend directly to borrowers, but offer financing through partner lenders, micro-lending institutions, and community development organizations.
There are two common types of SBA loans, the SBA 7(a) loan and the SBA 504 loan.
SBA 7(a) financing is used for developing owner-occupied business property. If you’re looking to build a new commercial establishment or renovate an old office, this can work for you. Likewise, a business is eligible for an SBA 7(a) loan if they occupy more than 50 percent of the property. An SBA 7(a) loan may guarantee up to 85 percent of the loan amount if the mortgage is $150,000. If you need a higher loan amount, the SBA can guarantee up to 75 percent.
This loan can be taken as fixed-rate mortgage, a variable-rate mortgage, or as a combination of the tow. SBA 7(a) loans fully amortize and typically paid up to 25 years. Moreover, the maximum rate for this type of financing is dependent on the current prime rate.
Qualified borrowers can secure up to $5 million from an SBA-backed lender. SBA 7(a) loans are available in fully amortized loans of up to 20 or 25 years.
Business owners can use SBA 7(a) loans to:
- Expand a business
- Establish or acquire a business
- Fund inventory
- Purchasing equipment and machinery
- Renovate or construct buildings
- Refinance existing business debt unrelated to the property
Another popular SBA commercial mortgage is the SBA 504 loan. It’s geared toward borrowers who utilize over 50 percent of their existing commercial property. This type of mortgage is structured with 2 loans: One part of the loan must be financed with a Certified Development Company (CDC) which accounts for 40 percent of the loan amount. The other part should be financed by a bank that will provide 50 percent of the loan amount.
With an SBA 504 loan, you can obtain up to f $5.5 million from your CDC lender. On the other hand, you can secure up to $5 million from the bank lender. You can use this type of loan to secure larger financing compared to an SBA 7(a) program. SBA 504 loans come with a fully amortized payment structure with a term of up to 20 years.
Borrowers can make use of SBA 504 loans to fund the following business goals:
- Invest in equipment
- Build or upgrade existing facilities
- Purchase existing land or buildings
- Develop land – parking, landscapes, streets
- Refinance debt associated with business expansion, including new or old property and equipment
Borrowers who are unable to secure commercial loans usually have a history of foreclosure or a short sale on a loan. When this happens, they can turn to private investors for hard money loans.
Hard money loans are granted by private lenders as long as you have sufficient equity signed as a collateral for the loan. This type of financing comes in short terms, such as 12 months up to 2 years. If you’re looking for short-term financing to move your business or reconstruct your establishment, you can take advantage of this type of loan.
However, take caution. Private investors can be critical when it comes to repayment. They may also perform background checks on your credit. They base loan approval on property value without heavy reference to creditworthiness. Furthermore, hard money loans usually demand a higher interest rate of 10 percent or more compared to traditional commercial mortgages.
Hard Money Loan Risks
If your lender notices you’re not producing the agreed income, they might cut your financing. Some private lenders may even seize assets signed as collateral till they see proof of return of investment. Keep these risks in mind before you sign up for a hard money loan. If you really must take it, make sure you have enough funds to cover all your bases.
Bridge loans are similar to hard money loans though they can last up to 3 years and the interest rate tends to be slightly lower – in the 6% to 10% range. Both bridge and hard money loans are typically interest-only loans.
Commercial Loan Repayment Example
To understand how commercial payments work, let’s review this example. Let’s presume your commercial real estate loan is $2.5 million with 9 percent APR, with a loan term of 10 years. Let’s use the calculator on top of this page to estimate your monthly payment, interest-only payment, and total balloon payment.
- Commercial loan amount: $2,500,000
- Interest rate: 9% APR
- Term: 10 years
| Payment Type | Amount |
|---|---|
| Principal and Interest payment | $20,155.80 per month |
| Interest-only payment | $18,787.00 per month |
| Balloon payment | $2,240,215.07 |
According to the results, your monthly commercial mortgage payment will be $20,155.80 for 10 years. If you choose to make interest-only payments, it will only be $18,787.00 per month. Once the 10 years is up, you must make a balloon payment of $2,240,215.07 to pay off your remaining balance.
What If You Can’t Make the Balloon Payment?
Sometimes, you might not be able to make a balloon payment on your commercial mortgage. If you’re worried about lack of funds, refinance before the end of the term. Start asking about refinancing at least a year before the term ends. This will save you from foreclosure and losing your lender’s trust. If you default on your loan, it spells bad news for your credit history, making it difficult to get approved for future commercial loans.
Commercial refinancing is basically taking out a new mortgage. It will help you restructure your payment into an amount you can afford. It also allows you to lower your interest rate and take a workable payment term. To refinance, you must also meet lender qualifications. Lenders conduct background checks on your personal and business credit history. They will also ask how long you’ve had the property.
How to build an Amortization table in EXCEL (Fast and easy) Less than 5 minutes
FAQ
How long can you amortize a commercial loan?
What is the payment on a $1,000,000 business loan?
What is a good interest rate on a commercial loan?
What is commercial loan amortization calculator?
Commercial Loan Amortization Calculator is used to calculate monthly payment for commercial loan payments with balloon payment. The commercial loan calculator is easy to use with a commercial loan amortization schedule excel that you can view in details.
What is the amortization table?
It is a useful tool for understanding how much of each payment goes towards paying off the loan and how much goes towards interest.You can use an **amortization calculator** to generate an amortization
How does a commercial loan amortization work?
Basically, you pay the first 10 years of principal and interest payments based on the full amortization table. Once the term ends, you make the balloon payment, which pays off the remaining balance in the mortgage. Furthermore, you have the option make interest-only payments in a commercial loan.
What is a commercial loan calculator?
The commercial loan calculator comes with an amortization schedule that is printable and exportable to excel. The commercial property mortgage calculator gives you all the necessary information such as the total payment, interest, and principal paid as well as the monthly payment breakdown.