US Commercial Loan Amortization Calculator: SBA, Balloon & DSCR

A commercial loan amortization schedule is a complete month-by-month table showing how each loan payment is split between interest and principal reduction, and what your remaining loan balance is after each payment. Early in the loan, most of each payment goes toward interest. As the loan matures, an increasing share pays down principal. The schedule also shows critical milestones like the end of an interest-only period, any balloon payment date, and the final payoff. Our calculator generates the full schedule — up to 300 rows for a 25-year loan — and exports it as a PDF.

Residential mortgages typically amortize fully over 30 years with no balloon. Commercial loans almost always have a shorter balloon term (5–10 years) than the amortization period (20–25 years), meaning you owe the remaining balance as a lump sum at balloon maturity. Commercial loans also commonly include interest-only periods, higher rates, larger origination fees, prepayment penalties, and DSCR qualification requirements. Commercial lenders also evaluate the property’s income-generating ability, not just the borrower’s personal credit.

Amortization periods vary by property type and loan program: commercial real estate (office, retail, multifamily) — typically 20–25 years; SBA 7(a) real estate — maximum 25 years; SBA 504 — 20 or 25 years; equipment loans — 5–10 years; bridge loans — 12–36 months (interest-only, no amortization). The balloon term is almost always shorter than the amortization period — commonly 5 or 10 years for most conventional commercial loans.

The standard formula is: PMT = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1] where P = loan principal, r = monthly interest rate (annual rate ÷ 12), and n = total amortization months. For example: $1M loan at 7.5% annual rate over 25 years = monthly rate of 0.625%, n = 300 months, monthly payment = $7,390. This formula assumes standard amortization — if you have an interest-only period, those months are calculated separately as P × r, then the standard formula applies to the remaining term.

Because interest is calculated on the remaining outstanding balance. In Month 1 of a $1M loan at 7.5%, you owe interest on the full $1M — that’s $6,250 in interest alone. If your payment is $7,390, only $1,140 reduces the principal. As you pay down the balance over time, less of each payment goes to interest and more goes to principal. This is why the first few years of a commercial loan make almost no dent in the outstanding balance — exactly what our schedule illustrates row by row.

A balloon payment is a large lump-sum payment of the remaining loan balance due at the end of the loan’s stated term — even if the monthly payments were calculated based on a longer amortization period. Example: a 25-year amortization with a 10-year balloon means you make regular P&I payments for 10 years as if repaying over 25 years, but at year 10 the entire remaining balance — typically 75–85% of the original loan — is due in full. You must either pay it in cash, sell the property, or refinance.

Your balloon balance at month k is calculated as: B = P × [(1+r)ⁿ − (1+r)ᵏ] ÷ [(1+r)ⁿ − 1]. As a rule of thumb: on a typical $1M loan at 7.5% with 25-year amortization and 10-year balloon, the balloon is approximately $815,000 — 81.5% of the original loan. Our calculator computes and displays this exact figure, highlighted in red in your amortization schedule. Use the calculator before signing to know precisely what you’ll owe at balloon maturity.

If you cannot pay the balloon when due, you have several options in order of preference: (1) Refinance into a new commercial loan before the balloon date — this requires qualifying based on current rates and property value; (2) Sell the property and use proceeds to satisfy the balloon; (3) Negotiate a balloon extension with your current lender — some offer 1–2 year extensions for a fee; (4) Default, which triggers foreclosure proceedings. The worst outcome is waiting until the balloon is due without a plan. Start refinancing conversations 6–12 months before balloon maturity, not the week it’s due.

Balloon loans serve lender and borrower interests for different reasons. Lenders use them to periodically reset interest rates to market conditions — at balloon maturity they can offer a new loan at current rates rather than being locked into a 25-year fixed rate. Borrowers benefit from lower monthly payments (calculated over 25 years vs. actual 10-year term), which improves cash flow. From the lender’s perspective, commercial real estate values and borrower circumstances change significantly over 25 years — a balloon forces a fresh underwriting review every 5–10 years.

During an interest-only (IO) period — typically 6 to 36 months at the start of a loan — your monthly payment covers only the interest accrued, with zero principal reduction. Your loan balance stays exactly the same throughout the IO phase. IO periods are common in bridge loans (full term IO), renovation loans, and some SBA 504 construction loans. After the IO period ends, payments jump to full P&I amortization calculated from the original principal balance. The payment increase at this transition can be significant — our calculator shows both payment amounts and clearly labels IO rows in the schedule.

SBA 7(a) is a single loan from a bank (guaranteed 75–85% by the SBA), up to $5M, used for business acquisition, working capital, real estate, or equipment. Variable rate (Prime + spread), max 25 years for real estate. SBA 504 is a two-loan structure: 50% from a bank, 40% from a CDC (Certified Development Company) backed by the SBA, 10% borrower down. Fixed rate on the SBA portion, strictly for fixed assets (real estate and equipment). SBA 504 typically offers a lower, fixed rate on the CDC portion — often 1–2% below market — but is more complex to close and requires owner-occupied use.

A bridge loan is short-term commercial financing (6–36 months) used during a transitional period — property acquisition during renovation, before permanent financing is secured, or between the sale of one property and purchase of another. Bridge loans are almost always interest-only for the entire term, with the full principal due as a balloon at maturity. Rates are higher (8–14%) with origination points (1–4%). There is no amortization of principal — the balance on Day 1 equals the balance on the last day before payoff. Bridge loans are intended to be refinanced into permanent financing, not held long-term.

CMBS loans are commercial mortgages pooled and securitized into bonds sold to investors. They offer competitive fixed rates but come with strict terms: defeasance or yield maintenance prepayment penalties (very expensive), non-recourse structure (lender can only seize the property, not personal assets), and strict DSCR requirements. CMBS loans are best for stabilized income-producing properties where the owner plans to hold long-term without refinancing. The amortization structure is standard — 25–30 year amortization with 5–10 year balloon — but the prepayment restrictions make early exit extremely costly.

DSCR (Debt Service Coverage Ratio) = Net Operating Income ÷ Annual Debt Service. It measures whether the property or business generates enough income to cover loan payments. A DSCR of 1.25x means income is 25% above the minimum needed to cover debt. Most US commercial lenders require a minimum of 1.20x–1.25x DSCR. Below 1.0x means the income doesn’t even cover payments — virtually no lender will approve this. SBA lenders often require 1.25x global DSCR (combining subject property income with total business income). A strong DSCR also gives you negotiating power for better rates and terms.

NOI = Gross Revenue − Operating Expenses (before debt service, depreciation, and income taxes). For a rental property: NOI = Gross Rent − Vacancy (5–10% factor) − Property Management − Maintenance − Insurance − Property Taxes − Utilities. Lenders typically use the trailing 12-month actuals if the property is stabilized, or a conservative pro-forma projection for new acquisitions. Many lenders apply a minimum vacancy factor of 5% even if the property is 100% occupied — this stress-tests your DSCR against a potential vacancy. Always ask your lender exactly how they calculate NOI before submitting your application.

Commercial lender credit score requirements vary significantly: Conventional bank loans — typically 700+ for best rates, 680 minimum; SBA 7(a) — 650+ minimum, 680+ preferred; SBA 504 — 680+ preferred; Hard money/bridge — 620+ or asset-based (property value matters more than credit); CMBS — 660+ typical. Note that for commercial loans, the property’s financial performance (DSCR) and the loan-to-value ratio often matter as much or more than personal credit score. A 680 credit score borrower with 1.35x DSCR and 65% LTV will often be approved where a 750 score borrower with 1.10x DSCR might not.

Maximum LTV ratios by loan type: Conventional commercial — 65–75% LTV (25–35% down); SBA 7(a) real estate — up to 90% LTV (10% down); SBA 504 — up to 90% LTV (10% down for established businesses, 15% for startups); Bridge/hard money — 65–75% LTV; Multifamily (agency) — up to 80% LTV. Important: for balloon loans, lenders also consider future LTV at balloon maturity. If property values decline significantly between origination and balloon date, refinancing may be impossible — even with perfect payment history. Model this risk now.

A personal guarantee makes the business owner(s) personally liable for the loan if the business defaults — putting personal assets (home, savings, investments) at risk. SBA loans always require personal guarantees from anyone owning 20%+ of the business. Conventional lenders require them for most small business loans. To limit exposure: (1) negotiate a “good guy” clause — personal liability ends when you vacate and surrender the property; (2) push for a “burn-off” where the guarantee reduces after 24–36 months of timely payments; (3) limit the guarantee to a fixed dollar amount rather than the full loan balance; (4) for established businesses with strong financials, some lenders offer non-recourse structures (CMBS, agency multifamily).

As of March 2026, US commercial loan rates by product: Conventional commercial real estate — 6.75%–9.00% depending on property type, LTV, and borrower strength; SBA 7(a) variable — Prime + 2.25%–2.75% (Prime was approximately 7.5% in early 2026, making SBA 7(a) rates 9.75%–10.25% for many loans); SBA 504 fixed (CDC portion) — approximately 6.4%–6.8%; Bridge/hard money — 9%–14%; Multifamily agency (Fannie/Freddie) — 6.5%–7.5%. Rates change frequently. Always verify current rates with lenders before using calculator projections for long-term planning.

The SBA charges an upfront guarantee fee on SBA 7(a) loans based on the guaranteed portion (not the full loan amount). The SBA guarantees 85% of loans ≤$150,000 and 75% of loans >$150,000. Guarantee fee rates (as of 2026): Loans ≤$150,000 — 0.5% of guaranteed portion; $150,001–$700,000 — 3.0%; $700,001–$5M — 3.5% on first $1M guaranteed, 3.75% on remainder. Example: $1M SBA 7(a) loan = $750,000 guaranteed portion × 3.5% = $26,250 SBA guarantee fee. This is typically financed into the loan. Our calculator auto-calculates this based on loan type selection.

The stated interest rate is the rate applied to your loan balance each month. True APR (Annual Percentage Rate) accounts for all upfront costs — origination points, SBA guarantee fees, appraisal, title insurance, and other closing costs — by solving for the effective rate that equates the present value of all payments to the net loan proceeds after fees. APR is always higher than the stated rate. A 7.5% loan with 2 origination points ($20,000) on a $1M loan has a True APR of approximately 7.84–7.9%. This is the only valid metric for comparing two loan offers with different rate/fee structures.

Origination points are an upfront fee charged by the lender, expressed as a percentage of the loan amount. 1 point = 1% of the loan. On a $1M commercial loan, 2 origination points = $20,000 paid at closing. Points increase the lender’s effective yield and are often used to “buy down” an interest rate (paying more upfront for a lower ongoing rate). Typical commercial loan origination fees range from 0.5%–2.0% for conventional bank loans, up to 3–4 points for bridge/hard money loans. Always factor origination points into your True APR calculation to make valid comparisons across lenders.

Yes — commercial loan interest is generally fully deductible as an ordinary and necessary business expense under IRC Section 163. For real estate, interest is deductible against rental income. For business loans, interest is deductible against business income. Important limitations: under the TCJA (Tax Cuts and Jobs Act), business interest expense deductions may be limited for large businesses with >$30M in gross receipts; real estate businesses can elect out of this limitation. Origination fees and points paid on business loans may need to be amortized over the loan term rather than deducted immediately. Always consult your CPA for your specific situation.

ASC 842 is a FASB accounting standard primarily governing lease accounting — it requires operating leases to be capitalized on the balance sheet. It does not directly affect commercial mortgage loan accounting, which follows ASC 310 (Receivables) for lenders and is recorded as a liability on the borrower’s balance sheet at amortized cost. However, ASC 842 does affect companies that lease commercial space rather than own it. If your business both owns (has a mortgage) and leases properties, your CPA will need to apply both standards to different assets. Our calculator is designed for loan amortization — not lease accounting under ASC 842.

A prepayment penalty is a fee charged when you pay off a commercial loan early — whether through refinancing, property sale, or lump-sum payoff. Unlike residential mortgages (which often have no prepayment penalty), virtually all commercial loans include one. The three main types: Step-down — declining percentage each year (5/4/3/2/1%) most common in SBA and bank loans; Yield maintenance — compensates lender for lost future interest, common in CMBS; Defeasance — borrower substitutes Treasury securities for loan collateral, also common in CMBS. Always know your penalty type and dollar amount before planning any refinance or sale.

Refinancing makes sense when: (1) the break-even period (prepayment penalty ÷ monthly interest savings) is shorter than your intended remaining hold period; (2) you need to pull cash out for business expansion or renovations; (3) your balloon is approaching and you need new long-term financing; (4) your current loan has an unfavorable structure (variable rate, short IO, restrictive covenants) that a new loan would fix. Break-even formula: Prepayment Penalty ÷ Monthly Payment Savings = Break-Even Months. If you plan to hold longer than break-even, refinancing saves money. If not, stay put.

It depends on your loan documents. Many commercial loans — especially SBA 7(a) — allow extra principal payments without penalty during the early years, but some lenders restrict this or require advance notice. CMBS loans rarely allow extra payments due to the securitized structure. Before making extra payments, verify with your servicer and check whether the payment applies to your next month’s principal first or directly to the outstanding balance. Extra payments in early years have the most impact — each dollar of principal reduction eliminates the interest that would have accrued on that dollar for the remaining loan term.

Defeasance is a prepayment mechanism in CMBS loans where the borrower replaces the mortgage collateral with a portfolio of US Treasury or government agency securities that generate the same cash flow as the remaining loan payments. This “defeats” the mortgage — releasing the property lien — while keeping the loan technically outstanding through the bond trust. The process requires: (1) a specialized defeasance consultant; (2) a securities broker to purchase the replacement portfolio; (3) new entity formation; and (4) legal work. Total cost: $30,000–$80,000+ in fees, plus the cost of purchasing securities. Generally cheaper than yield maintenance in a rising-rate environment.

The full refinance analysis formula: Net Savings = (Old Monthly Payment − New Monthly Payment) × Remaining Months − Prepayment Penalty − New Closing Costs. If Net Savings > 0 and you plan to hold the property longer than the break-even point, refinancing makes financial sense. Important: use True APR (not stated rate) for both loans. Also consider: (1) the reset of your amortization clock — a new 25-year loan means paying heavy interest for another 25 years; (2) cash-out proceeds if applicable; (3) change in balloon date; (4) potential improvement in DSCR if the new rate is significantly lower.

When you sell a commercially mortgaged property, the loan is typically paid off at closing from the sale proceeds — this is called a “full payoff.” You’ll receive a payoff quote from your servicer showing the outstanding principal, accrued interest through closing date, and any applicable prepayment penalty. Most commercial loans are not assumable (unlike some residential mortgages) — the new buyer must obtain their own financing. Some exceptions: certain SBA loans and agency multifamily loans may allow assumption with lender approval. Always request the payoff quote 30–45 days before your expected closing date and factor in the penalty in your net proceeds calculation.

Your amortization schedule is your exit planning roadmap. Key milestones to identify: (1) Prepayment penalty expiration date — when does each step of the penalty drop, and when does it reach zero? (2) Balloon maturity date — how many months to plan for refinancing before it arrives? (3) Equity accumulation timeline — at what year does your LTV drop below 70%, making refinancing easiest? (4) Interest-to-principal crossover point — at what year does more of each payment go to principal than interest? Use the downloaded PDF schedule to share these milestones with your CPA, broker, and lender well in advance.

Yes — and this is one of the most powerful uses. To compare two commercial loan offers: (1) Enter each loan’s terms separately and note the True APR for each — this is the only valid comparison point; (2) Compare total interest cost over your expected hold period (not the full amortization term); (3) Compare balloon amounts at the same future date; (4) Note any differences in prepayment penalty structure; (5) Compare monthly payment impact on your DSCR. Run the calculator for each scenario and download a PDF to share with your CPA or broker. The lender offering the lowest stated rate is often not the least expensive option overall.