# Comparing two commercial loan term sheets line by line

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Markdown: https://chicagocommercialfunding.com/guides/comparing-two-commercial-loan-term-sheets-line-by-line/index.md
Resource ID: comparing-two-commercial-loan-term-sheets-line-by-line
Published: 2026-10-21
Updated: 2026-10-21
Attribution: Chicago Commercial Funding Editorial
Topic: financing
Asset types: All commercial
Investment stage: Finance
Experience level: Intermediate

Compare commercial loan proposals by net usable proceeds, dated cash payments, outstanding principal, reserves, conditions, and the cost of the intended exit.

Compare commercial loan term sheets using the same property forecast and holding period. Record net usable proceeds, fees, debt service, remaining principal, reserves, extension conditions, guarantees, and exit costs. The lowest note rate and the largest headline loan are both incomplete answers.

A term sheet can also contain unresolved conditions. Identify which terms are indicative, approved, or subject to final documents. A detailed model does not turn a nonbinding proposal into a committed funding source.

## Build one comparison basis

Start with the acquisition's sources and uses and the actual business plan. Specify the required closing date, improvement schedule, expected stabilization, planned hold, and possible early exit. Give each lender the same supported information so the proposals answer the same request.

Keep the unlevered property forecast constant for the initial comparison. If one lender requires a different reserve or improvement program, show that difference explicitly. Otherwise a higher equity return may come from a changed operating assumption rather than better financing.

Compare both the base timeline and a delayed case. A loan that works well for a quick stabilization can become expensive or unavailable if the transition lasts longer. The decision should reflect the owner's capacity to fund that delay.

## Two hypothetical proposals

The following terms are invented and do not describe actual Jaken or current market offers.

| Term | Proposal A | Proposal B |
|---|---|---|
| Gross initial principal | $2,800,000 | $3,000,000 |
| Annual note rate | 6.5% fixed | 9% fixed |
| Payments | Monthly, 25-year amortization | Interest-only |
| Initial maturity | Five years | Two years |
| Origination fee | 1% of principal | 2% of principal |
| Assumed two-year exit charge | 2% of remaining balance | 1% of principal |
| Other costs and conditions | Must be confirmed | Must be confirmed |

Proposal A's origination fee is $28,000, leaving $2,772,000 before any other deductions. B's fee is $60,000, leaving $2,940,000. The difference in immediately usable proceeds after only those fees is $168,000, not the $200,000 difference in headline principal.

If fees are paid separately rather than deducted, show gross debt as a source and the fee as a use. The net equity economics should reconcile under either presentation. Do not deduct the fee twice.

## Calculate the payment schedule

Proposal A's monthly payment is approximately $18,905.80, or $226,869.61 annually. Proposal B's simple monthly interest is $22,500, or $270,000 annually. B therefore consumes approximately $43,130.39 more annual cash under the stated assumptions.

That comparison includes principal repayment in A's payment but none in B's. After 24 payments, A's principal is approximately $2,704,442.28. It has repaid approximately $95,557.72. B's principal remains $3 million if no other advances or payments occur.

The borrower should compare payments for liquidity and separate interest from principal for economic analysis. Calling every dollar of amortizing debt service a financing expense ignores the reduction in payoff principal, while ignoring principal in the cash forecast understates current payments.

## Reconcile a two-year financing-cost illustration

Over 24 months, A's total scheduled payments are approximately $453,739.21. Subtracting principal repaid gives approximately $358,181.49 of interest. Its assumed exit charge is 2% of $2,704,442.28, or approximately $54,088.85.

Adding interest, the $28,000 origination fee, and the hypothetical exit charge gives approximately $440,270.34 of specified financing costs. This excludes other fees, escrows, and costs not included in the illustration.

B's two-year interest is $540,000. Add the $60,000 origination fee and $30,000 assumed exit charge, producing $630,000 of specified costs. B delivers more initial usable debt but has a larger modeled financing cost and payoff.

This is not a complete annualized rate or a final investment ranking. The proposals fund different principal amounts, and the extra debt may have value if equity is constrained or funds a necessary scope. Compare full equity cash flows and risk under both structures.

## Ask what the extra proceeds actually solve

If the business plan needs the additional $168,000 of initial net funds, identify its use. Does it reduce required owner equity, fund improvements, or merely support a higher purchase price? A larger loan can be useful, but it should not conceal an underfunded capital plan.

If B's additional proceeds allow necessary work that A does not fund, model the work and its benefit explicitly. If the only difference is less equity, assess whether the ownership group prefers lower initial cash to the higher ongoing payment and maturity obligation.

Also compare future facilities and holdbacks. A larger total commitment may include money available only for approved improvements. Separate initial advance, lender-controlled reserves, and future qualifying draws. They are not interchangeable cash.

## Reserve and cash-management provisions matter

List required tax, insurance, capital, leasing, and interest reserves. Identify initial deposits, recurring contributions, custody, release tests, and whether unused balances are returned or applied to payoff under the actual documents.

A proposal can show ample cash after debt service while requiring that cash to remain restricted. Evaluate the conditions for distributions, lockboxes, and sweeps. A bank account balance does not by itself establish money available to investors.

The OCC handbook provides a primary framework for evaluating commercial loan structure and repayment. It does not replace review of the actual proposals and agreements. [OCC CRE handbook](https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf)

## Match maturity with the business plan

A two-year maturity can coincide with lease-up, construction completion, or a major tenant expiration. Size the refinance at that date using supported income and a downside valuation. Compare net proceeds with actual payoff and required reserves.

For Proposal A, a planned two-year sale occurs before the five-year maturity and incurs the explicitly assumed exit charge. For B, a two-year event coincides with maturity but still has the modeled exit fee. Actual prepayment and exit provisions may be very different; obtain transaction-specific language and quotations.

If an extension is necessary, identify notice, fees, paydown, coverage, rate protection, and default conditions. Do not compare a five-year commitment with a two-year initial term plus unverified extensions as though both provide the same certainty.

## Evaluate guarantees and consent rights

Identify the borrower, guarantors, guaranty scope, completion obligations, environmental indemnities, and any release or burn-off conditions. Labels such as recourse or nonrecourse require document-level interpretation. Do not assign a value to reduced exposure without understanding the actual terms.

Review transfers, ownership changes, additional debt, leasing approvals, construction changes, and property releases. These provisions can affect the intended business plan and exit flexibility. Obtain appropriate professional review for material issues.

Public real estate-company filings provide examples of financing structures and their relationship to property investment. Kimco's annual report is a useful disclosure reference, not a template for the subject borrower's rights. [Kimco 2025 Form 10-K](https://www.sec.gov/Archives/edgar/data/879101/000119312526060760/kim-20251231.htm)

## Execution risk belongs in the comparison

Ask who makes the credit decision, what remains unresolved, when third-party reports are ordered, who pays deposits, and what happens if terms change. Verify the lender or intermediary's role. A proposal with attractive economics has limited value if it cannot close within the transaction's required schedule.

Track conditions in a shared checklist with deadlines and owners. Appraisal, environmental, title, insurance, leases, and sponsor documentation can all affect execution. Avoid assuming that paying a deposit means all underwriting is complete.

For a Chicago-area investment, use the actual jurisdiction, lawful use, tax information, and property-condition findings. An unresolved use or material repair can affect both financing and the business plan. Address it early rather than hope that a larger loan compensates for missing diligence.

## Make the decision with a complete scorecard

Report initial equity, minimum monthly liquidity, annual cash, total specified costs, maturity gap, downside funding, and important contractual conditions for each proposal. Include a brief explanation of the tradeoff that determines the choice.

Jaken's commercial financing overview helps frame the asset-class discussion. Submit the same supported request and ask for complete terms so the comparison remains meaningful. [Jaken commercial financing](https://jakenfinancegroup.com/commercial-property-loans-by-asset-class/)

A good financing decision identifies which proposal best supports the property and ownership group through the entire business plan. The winning term sheet should be the one whose cash flows, conditions, and risks the investor can actually carry—not simply the one with the most attractive number at the top.


## Include undrawn and minimum-interest obligations

If a facility includes future advances, ask whether interest is charged only on drawn principal, whether unused commitment fees apply, and whether minimum-interest or exit provisions create payments independent of actual usage. Model the written structure. A commitment for improvements can have different economics from a fully advanced acquisition loan even at the same stated rate.

A minimum-interest clause can also change the benefit of an early sale. Paying a loan off quickly does not necessarily reduce financing cost in direct proportion to time. Obtain a written payoff illustration at the intended exit and a later date, while recognizing that actual balances and conditions can change. Add legal, servicing, draw, inspection, and release charges where applicable.

Preserve a list of costs that remain unquoted. A precise subtotal labeled complete can be more misleading than a range that openly identifies unresolved fees.

Date both proposals and record the conditions that remain open before treating the comparison as executable.

## Source registry

- [OCC — Commercial Real Estate Lending handbook](https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf): accessed 2026-10-21
- [Kimco Realty — 2025 Form 10-K](https://www.sec.gov/Archives/edgar/data/879101/000119312526060760/kim-20251231.htm): accessed 2026-10-21
- [Jaken Finance Group — Commercial property financing by asset class](https://jakenfinancegroup.com/commercial-property-loans-by-asset-class/): accessed 2026-10-21

## Related resources

- [The commercial investor’s guide to financing and capital stacks](https://chicagocommercialfunding.com/learn/financing/)
- [Commercial loan term versus amortization versus balloon](https://chicagocommercialfunding.com/guides/commercial-loan-term-versus-amortization-versus-balloon/)
- [Commercial loan covenants reporting and cash management](https://chicagocommercialfunding.com/guides/commercial-loan-covenants-reporting-and-cash-management/)