A medium-term loan, shorter than a permanent loan, that a bank makes on a finished property so the owner has time to lease it up before long-term financing.
The Federal Reserve’s examination manual explains where the word comes from. In the mid and late 1980s, it says, permanent mortgage lenders pulled back from overbuilt markets, and banks began to extend medium-term loans with maturities of up to seven years, also referred to as mini-perms, expecting permanent lenders to return as vacant space filled.
The idea is the same today. A mini-perm sits between the construction loan and the permanent loan. Often it is written into the construction loan as a period after completion, so the borrower does not need a new lender the day the building opens. It overlaps with what the OCC handbook calls a bridge loan, which that handbook says usually runs up to three years.
The thing to plan for is the end. A mini-perm is not paid down to zero over its term, so a balance comes due, and the manual notes that borrowers in the 1990s sometimes could not find long-term credit when it did. Ask what extension options exist and what the property must show to use them.
How it shows up in the data here
No public file labels a loan a mini-perm. On a bank call report these loans are part of multifamily or non-owner-occupied balances held once the building is finished, alongside every other term loan. To see which banks hold loans on leased property in a state, start at investor CRE lenders; for the payment and the balance due at the end of a short term, use the amortization and balloon calculator.
Go further
- Amortization and balloon calculator: What is still owed when a short term ends.
- Investor CRE lenders by state: Lenders holding loans on leased commercial property.
- Amortization and balloon calculator: Payment, balance at maturity and interest paid, for a loan that amortizes over longer than it runs.
- How bankers evaluate a commercial loan deal: A credit officer asks one question five ways: how will this loan be repaid, and what happens if it is not? Knowing the five tests lets you size a request before you send it.
- Investor commercial real estate loan checklist: On an investor property the rent pays the loan. The package is the evidence for the rent: who pays it, for how long, what it costs to collect, and who stands behind the borrower if it stops.
Related terms
- Bridge loan: A short-term loan that carries a newly built or newly bought commercial property until it is leased and earning enough to be sold or refinanced with a permanent loan.
- Permanent loan: A longer-term loan on a finished, leased property that replaces the construction or bridge loan and is repaid from the property's income.
- Take-out loan: The permanent loan that pays off a construction loan, or the commitment from a lender to make that loan once the project is finished and leased.
- Balloon payment: The lump sum of remaining principal due at the end of a loan's term when the regular payments did not pay the loan off in full.
- Lease-up: The period after a building is finished or renovated while it fills with tenants and its income climbs toward a stable level.
- Construction loan: A short-term loan that pays for building or renovating a property, advanced in stages as work is finished and repaid from a sale or a permanent loan.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.