Commercial loan closing costs catch many borrowers off guard. While most investors and business owners focus on interest rates and loan terms, the fees collected at closing can add tens of thousands of dollars to the total cost of financing. Understanding these costs upfront helps you budget accurately, compare lenders on equal footing, and negotiate better terms.
This guide breaks down every commercial loan closing cost you can expect, compares fees across loan types, and shows you exactly which costs are negotiable. Whether you are closing on a bridge loan, a CMBS conduit loan, or an SBA loan, the information below will help you walk into closing day fully prepared.
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How Much Are Closing Costs on a Commercial Loan?
Commercial loan closing costs typically range from 2% to 5% of the total loan amount. On a $1.5 million loan, that translates to $30,000 to $75,000 in fees paid at or before closing. Several factors push costs toward the higher or lower end of that range, including loan type, property complexity, lender requirements, and local government fees.
The largest single line item is usually the origination fee, which can range from 0.5% to 3% depending on the lender and loan product. Legal fees are the second-largest cost for most borrowers, especially on CMBS and conduit loans where the securitization process requires extensive documentation. Title insurance, appraisals, environmental reports, and survey costs round out the major expenses.
Unlike residential mortgages, commercial loan closing costs are not standardized. Each lender has its own fee schedule, and the total can vary significantly from one quote to another. This is why requesting a detailed fee estimate early in the process, ideally at the term sheet stage, is essential for accurate budgeting.
Beyond the fees listed in the table above, borrowers should budget for potential costs like rate lock fees, loan extension fees (common with bridge loans), and prepaid interest from the closing date through the end of the month. These smaller items can add $2,000 to $10,000 or more to the final closing statement.
Who Pays Closing Costs on a Commercial Loan?
In most commercial real estate transactions, the borrower pays the majority of loan-related closing costs. However, the allocation of costs between buyer and seller is more flexible than in residential transactions and is often a point of negotiation in the purchase agreement.
Here is how costs are typically divided:
Borrower (buyer) typically pays: Loan origination fees, appraisal, environmental reports, borrower's attorney fees, lender's attorney fees, processing and underwriting fees, insurance premiums, escrow reserves, and recording fees for the mortgage.
Seller typically pays: Real estate agent commissions, transfer taxes in some states, their own attorney fees, prorated property taxes through the closing date, and any agreed-upon title policy (owner's policy).
Split or negotiable costs: Title insurance (lender's vs. owner's policy), survey costs, and certain transfer taxes can be negotiated between the parties. In a buyer-friendly market, sellers may agree to cover a portion of the buyer's closing costs through a seller credit or price adjustment.
One important distinction in commercial lending is that the borrower almost always pays the lender's legal fees in addition to their own attorney costs. This is standard practice across most loan types and can add $5,000 to $20,000 or more to the borrower's closing costs, particularly with CMBS or conduit loan structures.
Contact our team for a no-obligation closing cost estimate on your next commercial loan. We provide transparent fee breakdowns before you commit to any loan program.
What Percentage Are Commercial Loan Closing Costs?
Commercial loan closing costs generally fall between 2% and 5% of the loan amount, with most conventional bank loans landing in the 2% to 3% range and specialty products like bridge loans and hard money loans reaching 4% to 6%. The percentage varies based on loan type, property type, deal complexity, and geographic location.
Here is how the percentage breaks down by loan type:
Conventional bank loans (2% to 3%): Traditional bank financing offers the lowest closing costs because origination fees are typically 0.5% to 1%, and legal fees are moderate since there is no securitization involved.
SBA 504 and 7(a) loans (2% to 5%): While SBA loans prohibit lenders from charging origination fees, the SBA guarantee fee (2% to 3.75% of the guaranteed portion) adds significantly to the upfront cost. CDC processing fees and packaging fees also contribute to the total.
CMBS and conduit loans (3% to 5%): The securitization process requires extensive legal documentation, which drives legal fees to $15,000 to $50,000 or more on larger deals. Origination fees are typically 0.5% to 1.5%, but the heavy legal costs push total closing expenses higher.
Bridge loans (3% to 6%): Bridge loans carry higher origination fees (1% to 3%) to compensate lenders for the shorter term and higher risk profile. Faster closings may reduce some due diligence costs, but the origination premium more than offsets those savings.
Hard money loans (4% to 7%): These asset-based loans carry the highest origination fees in commercial lending, often 2% to 5% of the loan amount. Combined with higher interest rates, hard money financing is the most expensive option by total closing cost percentage.
Use our commercial mortgage calculator to estimate your total closing costs based on your specific loan amount and type.
Are Commercial Closing Costs Tax Deductible?
Yes, most commercial loan closing costs are either tax deductible or can be depreciated over time, but the treatment varies by fee type. Understanding the IRS rules for each cost category helps you maximize your deductions and avoid common mistakes on your tax return.
The IRS generally divides commercial closing costs into three categories for tax purposes:
Costs amortized over the loan term: Origination fees, points, and loan-related legal fees are classified as debt issuance costs. Under IRC Section 461 and related regulations, these costs are amortized (deducted in equal monthly amounts) over the life of the loan. For example, a $20,000 origination fee on a 10-year loan would provide approximately $167 per month in deductions.
Costs added to property basis and depreciated: Appraisals, title insurance, surveys, environmental reports, recording fees, and property-related legal fees are capitalized into the cost basis of the property. These costs are then depreciated over the property's useful life, which is 27.5 years for residential rental property or 39 years for commercial property under current IRS rules.
Costs deductible in the year paid: Mortgage interest paid at closing (from the closing date to the end of the month) and property insurance premiums are generally deductible as business expenses in the year they are paid.
One important tax planning note: if you refinance or pay off the loan early, any unamortized loan origination costs can be deducted in full in the year the loan is retired. This creates a valuable deduction for borrowers who refinance commercial loans before the original term expires.
Always consult with a qualified CPA or tax advisor for guidance specific to your situation, as tax treatment can vary based on entity structure, property use, and current tax regulations.
What Is an Origination Fee on a Commercial Loan?
An origination fee is a charge from the lender for processing, underwriting, and funding your commercial loan. It is typically expressed as a percentage of the total loan amount, commonly referred to as "points." One point equals 1% of the loan amount, so a 1-point origination fee on a $2 million loan would be $20,000.
Origination fees on commercial loans typically range from 0.5% to 3%, depending on the loan type and lender:
- Banks and credit unions: 0.25% to 1%
- Life insurance companies: 0.5% to 1%
- CMBS/conduit lenders: 0.5% to 1.5%
- Bridge lenders: 1% to 3%
- Hard money lenders: 2% to 5%
- SBA lenders: No origination fee allowed (SBA regulation)
Some lenders originate loans at "par," meaning they charge zero origination fees and earn their revenue entirely from the interest rate spread. Par pricing is more common with life insurance companies and some bank portfolio lenders. When comparing loan quotes, be sure to evaluate the interest rate alongside the origination fee, because a lower origination fee may come with a higher interest rate, and the total cost of the loan over its full term may actually be higher.
The origination fee is almost always the most negotiable closing cost on a commercial loan. Borrowers with strong credit profiles, significant net worth, and existing banking relationships have the most leverage to negotiate reduced origination fees. Bringing a larger down payment or accepting a slightly higher interest rate can also help reduce or eliminate origination points.
How Do Closing Costs Differ by Loan Type?
Closing costs vary dramatically across commercial loan types. The differences stem from varying levels of due diligence, legal complexity, government involvement, and lender risk tolerance. Here is a detailed look at what to expect for each major loan category.
Conventional Bank Loans
Bank loans typically have the most straightforward and predictable closing costs. Origination fees run 0.5% to 1%, legal fees are moderate ($5,000 to $10,000), and the overall process involves standard documentation. Total closing costs on a conventional bank loan usually fall between 2% and 3% of the loan amount. Banks may also offer relationship pricing, reducing fees for existing clients with deposit accounts or other banking products.
SBA 504 and 7(a) Loans
SBA loans have a unique fee structure because the SBA prohibits lenders from charging origination fees on guaranteed portions. However, the SBA guarantee fee itself (ranging from 2% to 3.75% for 7(a) loans) adds a significant upfront cost. SBA 504 loans involve a CDC (Certified Development Company) that charges its own processing fee, typically 1% to 1.5%. Legal and documentation fees tend to be moderate, but the longer approval timeline (60 to 120 days) means more accumulated costs. Total closing costs for SBA loans range from 2% to 5%.
CMBS and Conduit Loans
Closing costs on conduit loans are among the highest in commercial lending due to the securitization process. Lender's legal fees alone can reach $15,000 to $50,000 or more because CMBS loan documents must comply with rating agency and trust requirements. Origination fees (0.5% to 1.5%) are comparable to conventional loans, but the legal premium pushes total costs to 3% to 5% of the loan amount. Borrowers should budget for a longer due diligence period and higher third-party report costs.
Bridge Loans
Bridge loans prioritize speed over cost efficiency, and their closing fees reflect that trade-off. Origination fees are the highest among institutional loan types (1% to 3%), but closing timelines are the shortest (14 to 45 days). Some bridge lenders streamline due diligence requirements, which can reduce appraisal and environmental costs. However, extension fees (0.25% to 1% per extension period) can add to the total cost if the loan is not repaid or refinanced within the initial term. Use our bridge loan calculator to estimate your total costs. Total bridge loan closing costs typically run 3% to 6%.
Ready to compare closing costs across loan types? Our advisors provide side-by-side fee breakdowns so you can choose the most cost-effective financing for your deal.
What Commercial Loan Closing Costs Are Negotiable?
Not all closing costs are set in stone. In commercial lending, several fee categories are open to negotiation, and borrowers who understand which costs are flexible can save thousands of dollars at closing.
Highly negotiable costs:
Origination fees are the most commonly negotiated closing cost. Lenders have full discretion over origination pricing, and borrowers with strong financials, repeat business, or competitive offers from other lenders can often negotiate a reduction of 0.25% to 0.5% or more. On a $3 million loan, that saves $7,500 to $15,000.
Processing and underwriting fees are internal lender charges that cover staff time. These fees range from $1,500 to $5,000 and can sometimes be reduced or waived entirely, especially for repeat borrowers or when bundled with other bank products.
Attorney fees cannot be negotiated with your lender directly, but you can shop for competitive rates among qualified commercial real estate attorneys. Getting quotes from multiple firms can save 20% to 40% on legal costs.
Escrow reserve requirements are negotiable in terms of the number of months required. Standard reserves are 2 to 6 months of taxes and insurance, but strong borrowers may negotiate lower reserve requirements.
Moderately negotiable costs:
Title insurance premiums are regulated by state, but some states allow for discounts on refinance transactions or simultaneous issuance of owner's and lender's policies. Rate lock fees can sometimes be waived if the borrower agrees to a floating rate through closing.
Non-negotiable costs:
Government recording fees, transfer taxes, and third-party due diligence reports (appraisals, environmental assessments, surveys) are set by external parties and cannot be negotiated with your lender. However, you can sometimes choose your own third-party vendors to ensure competitive pricing on inspections and environmental reports.
Negotiation strategies that work:
- Get competing loan quotes and use them as leverage
- Ask for a fee match if another lender offers lower closing costs
- Offer to increase your deposit relationship with the bank
- Request a par-rate loan with zero origination fees
- Negotiate seller credits as part of the purchase agreement
- Close at the beginning of the month to reduce prepaid interest
What Steps Can You Take to Reduce Commercial Closing Costs?
Beyond negotiation, there are practical strategies to lower your total out-of-pocket closing costs on a commercial loan.
Choose the right loan type for your situation. If closing costs are a primary concern, conventional bank loans typically offer the lowest total fees. Bridge loans and hard money options trade higher fees for faster execution and fewer qualification requirements, so consider whether speed is worth the premium.
Get your documents ready early. Delays in providing financial statements, tax returns, entity documents, and property information lead to longer processing timelines, which can trigger extension fees and additional costs. Preparing a complete loan package before applying streamlines the process and reduces unnecessary expenses. Review our closing process timeline for a detailed preparation checklist.
Compare lender fee schedules. Request a detailed fee breakdown (not just a rate quote) from at least three lenders before committing. The total cost difference between lenders on the same deal can be $10,000 to $30,000 or more. Pay special attention to origination fees, legal fee estimates, and any junk fees that may be buried in the closing statement.
Consider rolling costs into the loan. Many lenders allow borrowers to finance a portion of closing costs by adding them to the loan balance. While this increases your total debt and monthly payments, it reduces the cash required at closing. This strategy works best when your cash reserves are limited and the property generates strong cash flow to cover the higher payments.
Bundle services for discounts. Some title companies and law firms offer package pricing for title, escrow, and legal services. Additionally, maintaining a broader banking relationship (checking accounts, lines of credit, treasury management) can qualify you for reduced loan fees at many banks and credit unions.
Contact Clearhouse Lending today to get a transparent, itemized closing cost estimate for your commercial loan. We help borrowers navigate closing costs across every major loan type and identify opportunities to reduce fees.
What Are the Most Common Questions About Commercial Loan Closing Costs?
Can I roll closing costs into my commercial loan? Many lenders allow some or all closing costs to be financed as part of the loan balance. This reduces your upfront cash requirement but increases the total loan amount and monthly payments. Bridge lenders and some conventional lenders offer this option, though it may require a lower loan-to-value ratio to accommodate the added balance.
What is a good faith deposit, and is it refundable? A good faith deposit (also called an earnest money deposit or commitment deposit) typically ranges from $5,000 to $25,000 and is paid when you accept a loan commitment or term sheet. Most good faith deposits are applied to closing costs at settlement. Refundability depends on the loan agreement, but many deposits become non-refundable after specific due diligence milestones are met.
How do closing costs differ between a purchase and a refinance? Refinance transactions often have lower closing costs because there are no transfer taxes, no survey costs (if a recent survey exists), and potentially reduced title insurance premiums through a reissue discount. However, origination fees, legal fees, and appraisal costs are generally the same regardless of transaction type.
Are closing costs higher for mixed-use or specialty properties? Yes, properties with unusual uses, environmental concerns, or complex zoning typically carry higher due diligence costs. Phase II environmental assessments ($10,000 to $40,000) may be required, and specialized appraisals for properties like gas stations, hotels, or manufacturing facilities cost more than standard commercial appraisals.
When do I receive a final closing cost breakdown? Lenders typically provide a preliminary closing cost estimate at the term sheet stage, an updated estimate at commitment, and a final closing statement (settlement statement) 1 to 3 business days before closing. Review each version carefully and question any fees that were not disclosed earlier in the process.
What happens if closing costs exceed the lender's estimate? Unlike residential loans governed by TRID (TILA-RESPA Integrated Disclosure) rules with strict tolerance limits, commercial loans are not subject to the same disclosure regulations. This means closing costs can change between estimate and closing. However, reputable lenders provide accurate estimates and disclose any significant changes well before closing day.
Sources: CommLoan Commercial Property Closing Costs Guide, Finance Lobby Closing Cost Analysis, SBA 7(a) Loan Fee Guide, IRS Publication 530 - Tax Information for Property Owners, Lawhorn Mortgage - Commercial Loan Closing Costs, Crexi - Who Pays Closing Costs