Capital Structures
The rate is not the cost.
Repayment structure, collateral requirements, covenants, and prepayment terms determine the true cost of financing and how much risk you carry. A 7% loan secured by a blanket lien can be more expensive than a 9% loan secured by a specific asset. An interest-only period feels cheap until the balloon comes due. A prepayment penalty can convert a low-rate loan into an expensive one the moment conditions change. The headline rate is one variable in a structure that determines total cost.
Why structure often matters more than rate
Commercial loans are negotiated contracts, not off-the-shelf products. The terms inside a term sheet determine whether the financing fits the business or constrains it. Covenants decide what decisions you can still make after closing. Personal guarantees determine how much risk survives outside the business. Collateral structure decides how much of the company is effectively pledged against a single obligation. Maturity risk often matters as much as coupon risk, especially in loans built around balloon refinances. Two loans with identical headline rates can have materially different total costs and risk profiles once the structure is read carefully.
The guides below explain what each structural element controls: how amortization and interest-only payments diverge over time, what DSCR and LTV mean to a lender's underwriting desk, when mezzanine and subordinated debt make sense, and where hidden costs tend to sit inside standard loan documents.
How to use this hub
If you have a term sheet in front of you, start with DSCR, Loan-to-Value, and Loan Covenants to decode the terms lenders care about most. If you are comparing loan types, read Amortization vs. Interest-Only Payments and Fixed vs Variable Interest Rates. If a lender has asked for a personal guarantee or a blanket lien, work through those before signing. Each guide covers one structural element in depth, including where it matters most and when to push back.
Structure Guides
Amortization vs. Interest-Only Payments
A structural comparison of amortizing and interest-only repayment formats in commercial lending, covering mechanics, cost implications, and appropriate...
Balloon Payments
Balloon payments require borrowers to repay a large lump sum at the end of a loan term after...
Blanket Liens
A blanket lien gives a lender a security interest in all of a borrower's business assets, providing broad...
Collateral Valuation
Collateral valuation determines the recoverable worth of assets pledged against commercial loans. Lenders use standardized appraisal methods and...
Cross-Collateralization
Cross-collateralization ties multiple assets to one loan or multiple loans to one asset pool, giving lenders broader security...
Debt Service Coverage Ratio (DSCR)
The debt service coverage ratio (DSCR) measures whether a business generates enough cash flow to cover its debt...
Debt-to-Equity Ratio
The debt-to-equity ratio measures how much of a company's capital structure relies on borrowed funds versus owner investment....
Fixed vs Variable Interest Rates
Fixed and variable interest rates define how borrowing costs behave over the life of a commercial loan. Understanding...
Loan Covenants
Loan covenants are contractual conditions embedded in credit agreements that require borrowers to maintain specific financial metrics and...
Loan-to-Value Ratios
Loan-to-value (LTV) ratios measure the percentage of a property or asset's appraised value that a lender will finance....
Mezzanine Financing
Mezzanine financing is a hybrid capital instrument combining subordinated debt with equity participation, filling the gap between senior...
Personal Guarantees
Personal guarantees make business owners personally liable for commercial debt. Understand the types, legal implications, and negotiation strategies...
Prepayment Penalties
Prepayment penalties are fees lenders charge when borrowers pay off a loan before its scheduled maturity date. These...
SBA Equity Injection Requirements (10% Rule Explained)
Equity injection and down payment requirements define how much capital borrowers must contribute from their own resources to...
Subordinated Debt
Subordinated debt sits below senior obligations in the capital stack, absorbing losses first in exchange for higher yields....
UCC Liens
UCC liens are public filings that give lenders a legal claim on business assets used as collateral. Understanding...