Commercial loans are different from residential loans.
Residential loans are standardized and are not typically negotiable. The economic terms of residential loans are relatively simple and the language in residential loans are substantially similar to each other. This is because most residential loans are ultimately sold to either Fannie Mae or Freddie Mac and must comply with certain requirements imposed by each entity as a requirement to being purchased. In addition, residential borrowers are subject to statutory protections which supersede the terms in the loan documents.
Commercial loans are more complex, typically involving more documents, and are generally not subject to statutory protections. However, they are negotiable since each commercial lender offers customized terms to potential borrowers based on their own internal risk tolerance. Types of loans can range from a short term, interest only loan to longer term loan that amortizes over an even longer period of time. Loans can even be secured by an entity’s ownership interest as opposed to the real property owned by the entity. Generally, borrowers should pay particular attention to documents such as personal guaranties and environmental indemnification agreements where the principals are signing personally (as opposed to signing on behalf of the borrower entity).
An experienced commercial real estate attorney can identify terms that are negotiable as well as clearly explain the obligations of the borrower and any guarantor(s) under the loan documents.