Can a commercial refinance include working capital and soft costs, not just the real estate payoff?

Yes. This refinance was structured to cover the payoff of the existing commercial property loan while also providing working capital and soft cost financing to the operating business, sized into a single $4,995,000 first-lien facility rather than requiring a separate business loan.

How does a SOFR-indexed adjustable commercial loan rate work?

The rate is set as the Secured Overnight Financing Rate plus a fixed margin, here 5.50%, with the initial combined rate fixed for the first five years and recalculated at each five-year anniversary using the then-current index plus the same margin, with a floor equal to the initial starting rate so the rate can adjust upward but never below its starting point.

Why would a lender require proof that a related property listing has been cancelled before funding a refinance?

When a borrower operates multiple related properties, a lender underwriting long-term cash flow wants assurance that a companion asset generating the same operating income is not actively being marketed for sale, which could undermine the business's future ability to service the debt. This loan conditioned funding on certification that a related property's brokerage listing had been cancelled and was no longer valid.

What happens when a borrower has an unresolved state tax lien during a commercial refinance?

An unresolved state tax lien does not automatically kill a refinance, but the lender will typically require a written letter of explanation along with evidence the lien has been satisfied before disbursing funds. This loan conditioned funding on the borrower resolving two separate state tax liens filed in 2023.

How do commercial loan prepayment premiums typically work on a long-amortization conventional loan?

A common structure allows the borrower to prepay up to a set percentage of the principal balance in any rolling 12-month period without penalty, while any prepayment above that threshold triggers a premium on the full amount prepaid during that period. This loan allowed 20% annual prepayment penalty-free, with a 3%, 2%, 1% premium schedule declining across the first three years on amounts above that threshold.

Case Study: $4.995M Owner-User Refinance Plus Working Capital in San Antonio

Deal at a Glance

Loan Amount	$4,995,000
Property	Owner-occupied family attraction property
Location	San Antonio, Texas
Transaction	Refinance plus working capital and soft-cost financing
Lender	a private commercial lender
Rate	SOFR + 5.50% margin, fixed 5 years, adjusts each 5-year anniversary (floor at initial rate)
Term	30 years
Amortization	30 years
Prepayment Penalty	3%, 2%, 1% (years 1-3), 20% annual prepayment allowance
Loan Fee	$99,900 plus $2,500 processing fee
Collateral	First trust deed on the San Antonio property
Guaranty	Personal guaranty of principal
Closed	Q3 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-operator running an owner-user family attraction property in San Antonio, Texas, one of two related operating properties under common ownership in the state. The ownership group needed an SBA-adjacent conventional refinance to retire the San Antonio real estate debt while also freeing up working capital and soft-cost financing for the operating business, a combination that most straight real-estate lenders won't size into a single facility. Commercial Lending Solutions specializes in owner-user commercial refinancing and complex capital structures for business owners across Texas and nationwide.

San Antonio's attraction and entertainment real estate carries operating-business risk layered on top of standard commercial mortgage risk, and finding a lender comfortable underwriting both the property and the business behind it, at a size large enough to cover payoff plus working capital, took the right kind of specialty commercial lender, in this case a private commercial lender, rather than a conventional bank shop.

What Made It Hard

Sizing one loan to cover two purposes. The facility had to be large enough to retire the existing property debt and still leave meaningful working capital and soft-cost proceeds for the operating business, rather than treating the refinance and the capital need as two separate transactions.
A related property complicating the underwriting picture. With a sister attraction property under common ownership also active in the market, the lender required certification that the related property's brokerage listing had been cancelled, so the loan wasn't underwritten against income that might disappear through a related-party sale.
Unresolved state tax liens. Two separate state tax liens filed against the borrower in 2023, for $4,789 and $1,389, had to be explained and resolved as a condition of funding rather than simply disclosed and ignored.

How We Ran the Process

Trevor Damyan, a California-licensed real estate broker (CA DRE 02244836), placed this loan with a private commercial lender, with the signed commitment letter dated August 12, 2024:

$4,995,000 used to refinance the San Antonio commercial property and provide working capital and soft-cost financing to the operating business, secured by a first trust deed on the property
SOFR plus a 5.50% margin, with the initial combined rate fixed for the first five years and recalculated at each five-year anniversary at the then-current index plus the same margin, subject to a floor equal to the initial starting rate
A 30-year term and amortization, with interest payable monthly in arrears on a 360-day-year basis and payments collected via ACH
A declining prepayment premium of 3%, 2%, and 1% across the first three years, with up to 20% of the principal balance prepayable in any rolling 12-month period penalty-free before the premium applies to the full prepaid amount
A $99,900 loan fee plus a $2,500 processing fee
Verification of four years of tax returns (2020 through 2023) directly with the IRS before any disbursement, plus a completed appraisal review satisfying USPAP, FIRREA, and Interagency Guidelines
Resolution of two outstanding state tax liens filed in 2023, requiring a written letter of explanation and evidence of satisfaction before funding
Certification that the related Houston-area attraction property's brokerage listing had been cancelled and was no longer active, protecting the lender's underwriting of the borrower's combined operating picture
Verification of 100% owner-occupancy of the improvements by the borrower's operating company, plus payoff demands and full loan documentation from the lenders being refinanced

The refinance closed within the commitment letter's acceptance window, retiring the prior property debt and delivering the working capital the operating business needed alongside it.

"This deal worked because we didn't let the lender treat the real estate and the working capital need as two separate problems. Once Harvest could underwrite the operating business alongside the property, the related-property and tax-lien issues were just conditions to clear, not reasons to walk away."
, Trevor Damyan, Commercial Lending Solutions

Why We Won This One

Structuring this as one combined refinance and working-capital facility, rather than forcing the borrower to chase a separate business loan on top of a standalone mortgage refinance, is what made this deal efficient. Most conventional lenders size strictly to the real estate; getting a lender comfortable underwriting the operating business's tax return history and cash flow alongside the property let the borrower solve both problems in a single closing.

Getting ahead of the related-property and tax-lien conditions early, rather than letting them surface mid-underwriting, also kept this on schedule. A lender this attentive to a companion asset's marketing status and a borrower's lien history needs those answers resolved before it will commit capital, and having them addressed proactively avoided a late-stage scramble that could have jeopardized the closing timeline.

Is This Structure Right for Your Deal?

If you operate a business out of property you own and need capital that covers both the real estate and the business behind it, a combined refinance and working-capital facility can be more efficient than two separate loans. We arrange owner-occupied commercial loans and permanent 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 refinance.

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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