Deal at a Glance
| Loan Amount | $2,200,000 |
| Property | Owner-occupied commercial building, automotive service use |
| Location | Hawthorne, California |
| Transaction | Refinance, SBA EIDL subordination plus SBA 7(a) and online-lender payoff |
| Lender | a bank |
| Rate | 7.00% fixed for 5 years |
| Amortization | 25 years |
| Term | 5 years |
| Maximum LTV | 65% |
| Minimum DSCR | 1.25x property-level, 1.00x global |
| Prepayment Penalty | 3% (years 1-3), 2% (year 4), 1% (year 5), on amounts prepaid over 20% annually |
| Loan Fee | 0.50% plus $1,250 documentation fee |
| Collateral | First deed of trust, assignment of rents, UCC-1 on the business |
| Closed | Q2 2024 |
The Deal That Walked in the Door
We are Commercial Lending Solutions, a commercial mortgage brokerage based in Los Angeles, and this refinance came to us through an owner-user business operating an automotive service operation out of its own building in Hawthorne, CA. The ownership had layered on a stack of financing over time, a first mortgage, an SBA EIDL loan from the pandemic era, an SBA 7(a) loan, and a an online lender balance, and needed a lender willing to look at the whole capital stack and restructure it into something serviceable.
Hawthorne sits in the South Bay industrial and auto-service corridor near Los Angeles, and a straightforward owner-user refinance there depends on finding a regional bank comfortable underwriting both the real estate and the operating business behind it, not just the property in isolation. Commercial Lending Solutions specializes in owner-user commercial refinancing for business owners across California, drawing on a background in structured finance at CBRE and Marcus and Millichap Capital Corporation.
What Made It Hard
- An existing SBA EIDL balance on title. Rather than a clean payoff scenario, the new lender needed to accept a subordinate position behind its own first deed of trust for the EIDL loan, since paying that low-rate federal balance off outright would have been inefficient for the borrower.
- Two other liens to clear before closing. An existing SBA 7(a) loan and a an online lender balance both had to be paid off in full before the bank would fund, meaning the refinance had to be sized and sequenced correctly so proceeds actually covered every payoff plus closing costs.
- Dual DSCR covenants. The bank underwrote to both a minimum 1.25x property-level debt service coverage ratio and a separate minimum 1.00x global DSCR, requiring a full picture of the guarantor's business financials, not just the real estate's rent roll.
How We Ran the Process
Trevor Damyan, a California-licensed real estate broker (DRE #02244836), placed this loan with a bank, with the signed letter of intent dated April 29, 2024:
- $2,200,000 secured by a first deed of trust on the Hawthorne property, a collateral assignment of all present and future rents, and a UCC-1 filing against the operating business
- 7.00% fixed for five years, amortized over 25 years with principal and interest payments monthly
- A maximum 65% loan-to-value, subject to a satisfactory appraisal and a clean Phase I environmental report
- Subordination of the existing SBA EIDL loan balance behind the bank's new first-lien position, rather than requiring it to be paid off
- Payoff of the existing SBA 7(a) loan and the an online lender balance as a precondition to closing, clearing every other claim against the collateral and the business
- A minimum 1.25x debt service coverage ratio at the property level and a separate minimum 1.00x global debt service coverage ratio across the borrower's and guarantor's combined obligations
- A stepped prepayment penalty on amounts prepaid beyond 20% of the outstanding principal balance in a given year: 3% in years one through three, 2% in year four, and 1% in year five
- A 0.50% loan fee plus a $1,250 documentation fee, alongside a requirement to open a business deposit account at the bank and enroll in automatic loan payment debit from that account for the life of the loan
- Annual reporting covenants: tax returns for both borrower and guarantor, an annual property operating statement, an annual business financial statement, and a personal financial statement upon request
The refinance closed with the bank taking a first-lien position, the EIDL loan subordinated behind it, and both the SBA 7(a) loan and the an online lender balance retired at closing, consolidating a fragmented capital stack into a single fixed-rate facility.
"The instinct on a deal like this is to clean up every lien and start fresh, but that would have cost the borrower a cheap piece of federal debt for no real benefit. Getting the bank comfortable subordinating behind that EIDL balance, while still clearing everything else ahead of closing, is what actually made the refinance pencil."
Why We Won This One
The EIDL subordination is what made this refinance work financially rather than just legally. A straight payoff-everything approach would have forced the borrower to retire a federal loan carrying far better terms than anything available in the current rate environment, purely to simplify the lien stack. Structuring the EIDL as a subordinate position instead let the borrower keep that cheap capital in place while still giving the bank the clean first-lien collateral position it needed to approve the loan.
Sequencing the SBA 7(a) and an online lender payoffs correctly, so the new loan proceeds actually covered both in full alongside closing costs, also mattered here. A capital stack this layered fails quickly if the payoff math is off by even a modest amount, and getting that sizing right the first time kept the deal moving toward a single closing rather than a second round of negotiation.
Is This Structure Right for Your Deal?
If your business has accumulated a mix of SBA, real estate, and alternative-lender debt against the same property, a refinance that restructures the whole stack, rather than just replacing one piece of it, can meaningfully simplify your balance sheet. We arrange owner-occupied commercial loans and from a network of more than 1,000 capital sources.
Apply for financing or call us at 310.708.0690 to talk through your refinance.
This is one of 32 closings we have arranged in Los Angeles County. Read about how we work as a Los Angeles commercial mortgage broker, see our Los Angeles commercial mortgage loans, or browse all 46 California closed deals.
Trevor Damyan is a commercial mortgage broker at Commercial Lending Solutions with a background in structured finance at CBRE and Marcus and Millichap Capital Corporation. He specializes in bridge loans, construction financing, SBA programs, DSCR loans, and complex capital structures for investors and developers across all 50 states.
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