Case Study: $1.386M Restaurant Retail Refinance in Downtown Santa Ana at 6.875% Fixed

The Deal That Walked in the Door

We are Commercial Lending Solutions, a commercial mortgage brokerage based in Los Angeles, CA. Commercial Lending Solutions specializes in DSCR loans, SBA refinances, and credit union relationships for retail and restaurant property owners across California and beyond. This deal is a textbook example of graduating a borrower out of SBA debt with a credit union loan. The client: an Orange County owner, based in Huntington Beach, who holds a restaurant and retail building on the 4th Street corridor of downtown Santa Ana, one of the county's most distinctive dining and nightlife districts. The building houses two operating restaurants plus an upstairs office suite, and it had been carrying an SBA loan from a business bank with a balance just over $1.37 million.

SBA debt gets deals done when nothing else will, but it comes with baggage: adjustable pricing, prepayment friction, and paperwork that never really ends. The owner's goal was simple: pay the bank off in full, lock a fixed rate for five years, and hold the property with a clean, low-leverage conventional loan. At roughly 50% of value, the numbers deserved better than an SBA structure.

What Made It Hard

• Restaurant tenancy. Two of the building's tenants are restaurants, and most lenders discount restaurant income on sight. The winning lender required the anchor restaurant tenant's business financials to prove the rent was supportable, plus signed estoppels and SNDAs from the tenants before funding.
• Short remaining lease terms. The leases had not yet been extended to the minimum 3-year term the lender wanted. Rather than let that kill the deal, the lender structured around it: a 6-month payment reserve holdback of $54,630, releasable once satisfactory lease extensions were in hand.
• An SBA payoff with moving parts. The payoff demand from the incumbent bank came to $1,387,885.85 including prepaid interest, a reconveyance fee, and trailing charges, slightly more than the new loan amount, so the sources and uses had to be watched to the dollar through closing.
• A rate lock with a fuse on it. The borrower signed a 60-day rate lock on June 25, 2024 with a $3,500 fee, locking 6.75%. The lock ran to August 14, and the loan did not fund until August 29, so the final commitment priced at 6.875%. Every week of diligence delay had a real cost.

"SBA debt gets a lot of deals done, but once the cash flow can stand on its own, a conventional credit union loan is almost always the better long-term home for it."

How We Ran the Process

Trevor Damyan, a California-licensed real estate broker (CA DRE 02244836), knows that for a stabilized, low-leverage retail asset under $2 million in Southern California, the sharpest money is very often credit union money, so that is where we took the file. We canvassed the market in May and June 2024 and put four soft quotes side by side on June 6: three Southern California credit unions and a bank. We ran the comparison for the client line by line, and one Los Angeles County credit union separated itself on rate, amortization, and above all prepayment flexibility. Its letter of interest was issued June 14 and signed June 25, and the winning structure looked like this:

• $1,386,000, capped at 50% of appraised value, conventional, no SBA guarantee and no SBA fees
• 6.875% fixed for five years on a 30-year amortization, a monthly payment of $9,105.03, calculated on a 360-day year
• No prepayment penalty at all, which mattered to an owner who wanted the option to sell or restructure at any time
• A 0.50% loan fee ($6,930), with the borrower's $10,000 due diligence deposit and $3,500 rate lock fee credited back at closing
• Relationship terms: a minimum average daily deposit relationship of 10% of the loan amount, or $138,600, held at the credit union for the life of the loan in exchange for a 50 basis point relationship discount on pricing

Underwriting ran through July and August: tenant estoppels, SNDAs signed August 7 and August 13, lease extension negotiations, and the credit union's own appraisal and environmental review. The commitment letter was issued August 19, 2024, the loan closed August 29, and funds disbursed August 30. The bank's SBA note was paid in full, and after every fee and reserve the borrower actually walked away from the closing table with $7,093.75 back in their pocket.

Why We Won This One

The first lesson from this file is that the right lender bucket beats the right negotiation. Banks quoted this deal, but for a sub-$2 million, 50% leverage, owner-adjacent retail asset, Southern California credit unions simply price better and ask for less. The winning credit union gave a 5-year fixed rate with zero prepayment penalty, something almost no bank offered, and its relationship discount structure let the client buy 50 basis points of rate with deposits they were happy to move anyway. Knowing which three credit unions to call, and having live contacts at each, is the whole job.

The second lesson is that structure can solve what documents cannot. The short restaurant leases could have stalled this loan for months while extensions were negotiated. Instead we agreed to the 6-month payment reserve holdback, let the loan close on schedule, and left the client a clear path to recapture $54,630 once the extensions signed. Trading a temporary reserve for a closed loan is almost always the right trade when the alternative is an expired rate environment.

Third: deadlines are real. The rate lock expired two weeks before funding and the note priced 12.5 basis points higher because of it. We pushed hard through August, chasing tenant signatures on estoppels and SNDAs ourselves rather than waiting on the file, precisely because every idle week was costing the client money. A broker who treats the lender's checklist as the client's problem does not close in ten weeks.

Is This Structure Right for Your Deal?

If you own a retail or restaurant property and you are still carrying SBA or adjustable bank debt at low leverage, there is a strong chance a fixed-rate conventional refinance beats what you have. We arrange permanent loans, owner-occupied commercial loans, and when they genuinely fit, drawing from a network of more than 1,000 capital sources including the Southern California credit unions that compete hardest on deals like this one.

Apply for refinancing or call us at 310.708.0690 to talk through your property.

This is one of 46 closings we have arranged across California from our Los Angeles office. See our California commercial financing page, or browse all 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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