Can a small commercial condo unit qualify for a traditional bank loan?

Yes. This $1,325,000 loan closed with a bank against a single downtown Los Angeles commercial condo unit, underwritten with the same institutional standards, appraisal requirements, and documentation as a much larger commercial property.

How does a 25-year amortization with a 5-year term work on a commercial condo loan?

This loan calculated monthly payments as if the loan would be repaid over 25 years, keeping payments manageable, but the full remaining balance became due after 5 years unless the borrower exercised a built-in 5-year renewal option, common structure for bank commercial real estate lending.

What triggers a default rate increase on a commercial bank loan?

This loan specified that any default under the loan documents would increase the interest rate by 15 percentage points over the otherwise applicable rate, and separately, failure to deliver annual financial statements on time could also trigger the default rate, giving the lender a real financial consequence for non-compliance.

Why would a bank require a demand deposit account relationship as a loan condition?

Requiring the borrower to bank with the lender and deposit rental income there gives the bank direct visibility into the property's cash flow and a natural point of contact if payments become irregular. This loan required the borrowing entity to maintain its deposit relationship with a community bank and route all rental and business proceeds through it.

How does a step-down prepayment penalty differ across loan years on a bank loan?

This loan charged 3% of any prepayment in year one, 2% in year two, 1% in year three, and no penalty at all in years four and five, giving the borrower increasing flexibility to sell or refinance without penalty as the loan matured, with the fee waived entirely for a refinance with the same bank.

Case Study: $1.325M Bank Loan for a Commercial Condo in Downtown Los Angeles

Deal at a Glance

Loan Amount	$1,325,000
Property	Commercial condo unit
Location	Downtown Los Angeles, California
Lender	a community bank
Rate, Years 1-5	7.25% fixed
Rate, Years 6-10	Prime, floating, 7.25% floor
Amortization	25 years
Term	5 years with one 5-year renewal option, balloon at month 60
Monthly Payment	$9,577.19
Minimum DSCR	1.25x throughout the loan term
Maximum LTV	63%
Prepayment	Step-down 3% / 2% / 1% / 0% / 0% by year; waived if refinanced with a community bank
Commitment Fee	$9,937.50, non-refundable
Default Rate Increase	+15 percentage points over the applicable rate
Guaranty	Personal guaranty of principal(s)/beneficial owner(s)
Closed	Q3 2024 (commitment dated June 2024)

The Deal That Walked in the Door

We are Commercial Lending Solutions, a commercial mortgage brokerage based in Los Angeles, and this deal brought us a downtown Los Angeles commercial condo unit needing a straightforward, fixed-rate bank loan. The ownership group had already been through this financing process with us on other commercial condo holdings, and this unit needed its own independent underwriting sized to its own appraised value and income.

Downtown Los Angeles' commercial condo market gives owners flexibility to hold and finance individual units separately, which matters when a bank's loan-to-value and debt service requirements are specific to each unit's own characteristics rather than a blanket portfolio structure.

Commercial Lending Solutions specializes in placing bank financing for commercial condo owners and investors across Los Angeles and the wider California market, and on this deal a bank was the right fit for a straightforward, fixed-rate structure sized to a single unit.

What Made It Hard

A conservative loan-to-value ceiling. At a maximum 63% loan-to-value, the loan had to be sized carefully against an independent appraisal of the unit, leaving real equity behind the bank's position.
Full institutional documentation on a relatively small loan. Title insurance, survey, borrower's counsel opinion, corporate resolutions, and ongoing annual financial reporting requirements all applied at the same level of rigor as a much larger commercial loan.
A required banking relationship. The lender conditioned the loan on the borrower maintaining its primary deposit account with a community bank and routing all rental and business income through it, a real operational commitment beyond just the mortgage itself.

"What made this one work was refusing to treat it like a scaled down version of a bigger deal. We sized it against its own appraisal and its own income from day one, so there was nothing to renegotiate once the bank got deep into underwriting."
, Trevor Damyan, Commercial Lending Solutions

How We Ran the Process

Trevor Damyan, a California-licensed real estate broker (DRE #02244836), placed this loan with a community bank, with the commitment letter issued June 28, 2024:

$1,325,000 secured by a first deed of trust, assignment of rents and leases, and a UCC-1 filing against the condo unit
7.25% fixed for the first five years, then floating at the prime rate for years six through ten, subject to a 7.25% floor
25-year amortization with monthly payments of $9,577.19, structured as 59 payments followed by a balloon at the 60th month unless the 5-year renewal option is exercised
A minimum 1.25x debt service coverage ratio throughout the loan, with the bank retaining discretion to raise the rate rather than call a default if coverage fell short
63% maximum loan-to-value based on an independent appraisal satisfactory to the lender
A step-down prepayment penalty: 3% in year one, 2% in year two, 1% in year three, and no penalty in years four and five, waived entirely if refinanced with a community bank
A $9,937.50 non-refundable commitment fee, deemed earned upon issuance of the commitment regardless of whether the loan closed
A required demand deposit relationship, with the borrower obligated to maintain its primary account at a community bank and deposit all rental income and business proceeds there
A personal guaranty from the principal(s)/beneficial owner(s), plus a 15-percentage-point default rate increase if any loan document obligation was breached

The loan closed inside the commitment window, giving the ownership group a fixed-rate facility on this specific unit structured around its own value and income, independent of any other holdings.

Why We Won This One

Underwriting each commercial condo unit on its own merits, rather than trying to force a blanket facility across multiple holdings, is what let this loan close cleanly at bank pricing. The conservative 63% loan-to-value ceiling meant sizing the request carefully against the unit's actual appraised value from the outset, avoiding a renegotiation later in underwriting.

Working through the deposit relationship requirement and annual reporting obligations up front, rather than treating them as afterthoughts, kept the closing on schedule within the commitment's expiration window, a real constraint on bank commitment letters that expire if the loan doesn't close in time.

Is This Structure Right for Your Deal?

If you own a commercial condo unit and want fixed-rate bank financing sized to its own value and income, we can help you find the right lender fit. We arrange permanent loans and owner-occupied and investment commercial financing from a network of more than 1,000 capital sources.

Apply for financing or call us at 310.708.0690 to talk through your condo unit.

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

Commercial Mortgage Broker, Commercial Lending Solutions | CA DRE 02244836

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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