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Should I negotiate for the landlord to carry my TI allowance as a non-interest-bearing loan?

📖 2,510 words🗓️ Published Jul 2, 2026

Direct Answer

Yes, absolutely negotiate for a non-interest-bearing TI loan — it’s one of the most powerful cash-flow moves a tenant can make, especially in a soft market. A tenant improvement allowance (TI) is typically either a direct grant (free money) or a loan repaid over the lease term. When the landlord carries it as a non-interest-bearing loan, you get the full TI amount upfront to build out your space, then repay it in equal installments over the lease term with zero interest — effectively an interest-free line of credit from your landlord. This preserves your working capital for your business instead of tying it up in construction, and it’s far cheaper than a bank loan or drawing on your own reserves. The catch: the landlord will likely want a higher base rent or a longer lease term to compensate for the risk, so you need to model the net effective rent to ensure you’re not paying more in total than if you took a lower rent and funded the buildout yourself. In most Class A and B office or retail deals, this is standard practice — but you must explicitly ask for it in the letter of intent (LOI) and have your broker run the numbers to prove it’s a win-win.

CRO SYNDICATE

The Mechanics of a Non-Interest-Bearing TI Loan

A non-interest-bearing TI loan works like this: the landlord gives you a lump sum to cover your buildout costs. You repay that amount over the lease term in equal monthly installments. There’s no interest charged, so the total repayment equals the original loan amount. This is fundamentally different from a TI allowance grant, where the landlord simply gives you the money with no repayment obligation — but that grant usually comes with a higher base rent baked in. The loan structure is common when the tenant wants a lower base rent but needs the cash upfront for construction. The landlord’s motivation: they secure a long-term lease with a creditworthy tenant, and the repayment stream offsets their risk. For the tenant, it’s a zero-cost financing tool that avoids bank fees, interest rates, and personal guarantees tied to a conventional loan. Always get the loan terms written into the lease agreement as an exhibit, specifying the repayment schedule, default consequences, and whether the loan is recourse or non-recourse to the tenant.

When This Structure Benefits You Most

The non-interest-bearing TI loan is a strategic weapon in specific scenarios. First, startups and growing companies that need to conserve cash for hiring, inventory, or marketing — every dollar saved on buildout financing goes directly into business growth. Second, tenants with strong credit who can negotiate better terms because the landlord sees lower default risk. Third, short-term leases where a traditional TI grant would push rent too high — the loan lets you keep base rent lower while still getting the buildout funded. Fourth, tenant improvements that exceed the standard TI allowance — if the landlord offers a base allowance but your buildout costs more, the loan covers the gap without interest. Fifth, multi-tenant floors where the landlord wants a uniform buildout standard — they may offer a loan to align finishes. The downside: if your business fails or you break the lease early, you may owe the unamortized balance as a lump sum — a default risk you must model. Always negotiate a cap on early repayment penalties and a sublease clause that lets a new tenant assume the remaining loan balance.

How to Model the Net Effective Rent

You must calculate the net effective rent (NER) to compare a non-interest-bearing TI loan versus a higher base rent with a TI grant. Here’s the formula: NER = (Total Rent Paid Over Lease Term – TI Allowance) ÷ (Square Footage × Lease Months). For example, take a 10,000 sq ft space with a 10-year lease. Option A: landlord gives a non-interest-bearing loan (repayable over 10 years) with base rent at a certain rate per sq ft annually. Total rent is calculated over the term. Subtract the loan because you repay it, so net cash outflow equals total rent. NER is then derived from that net outflow divided by total square footage-months. Option B: landlord gives a TI grant (free money) but base rent is higher per sq ft annually. Total rent is higher. No repayment, so net outflow equals total rent. NER is higher. The loan option wins by a margin per sq ft per month — saving money annually in rent. Run this model with your actual numbers, including operating expenses (NNN) and parking charges, to see the true cost. A good broker will build a lease abstraction model that factors in rent escalations, free rent periods, and TI timing.

Key Negotiation Points in the LOI

When you put the non-interest-bearing TI loan in the LOI, specify these terms clearly. First, loan amount — state the exact dollar figure or per-square-foot amount. Second, repayment term — match it to the lease term or a shorter period. Third, interest rate — explicitly say “0% interest” to avoid a later claim of imputed interest. Fourth, amortization schedule — monthly payments starting after the rent commencement date, not during any free rent period. Fifth, default provisions — if you default, the unpaid balance becomes due immediately, but negotiate a cure period of 30–60 days. Sixth, subordination — the loan should be subordinate to any senior debt the landlord holds, so it doesn’t trigger a cross-default. Seventh, prepayment — allow you to pay off the loan early without penalty if you sell the business or assign the lease. Eighth, documentation — require a separate promissory note or loan agreement attached as an exhibit to the lease. Your broker should push for these terms in the proposal stage, because once the lease is signed, the landlord has little incentive to amend.

Risks and How to Mitigate Them

The biggest risk: personal liability. If the loan is recourse to the tenant entity and you personally guarantee the lease, a default could hit your personal assets. Mitigate by negotiating non-recourse language — the loan is secured only by the leasehold improvements, not your business or personal assets. Second risk: accelerated repayment on early termination. If you break the lease early on a long-term loan, you owe the remaining payments as a lump sum — potentially a large amount. Negotiate a sliding scale where the repayment amount decreases over time. Third risk: hidden costs — the landlord may add a “loan origination fee” or “administrative charge” that effectively creates interest. Demand a zero-fee clause. Fourth risk: tax implications — the IRS may treat the forgiven portion of a TI grant as taxable income, but a loan repayment is not income. Consult a tax advisor to confirm your jurisdiction’s rules. Fifth risk: construction delays — if the buildout runs over budget, you may need more than the loan amount. Negotiate a contingency reserve that the landlord can advance as an additional non-interest-bearing loan.

When to Walk Away from This Structure

Don’t take the non-interest-bearing loan if the landlord uses it as a smokescreen to inflate base rent beyond what the market justifies. Run a market comparables analysis — if similar spaces in the building or area have base rent at a lower rate, and the landlord offers a higher rate with the loan, you’re overpaying. Walk away if the loan terms include personal guarantees that expose you to unlimited liability — better to fund the buildout with a Small Business Administration (SBA) loan at a reasonable interest rate. Also avoid if the lease term is too short to amortize the loan comfortably — a short lease with a large loan means high monthly payments, which could strain cash flow. If the landlord refuses to put the loan terms in writing as a separate exhibit, that’s a red flag — verbal promises are worthless in court. Finally, if your business has uncertain revenue or you’re in a volatile industry, the fixed repayment obligation adds leverage risk. In those cases, negotiate a TI grant instead, even if it means higher rent — the flexibility is worth the cost.

CRO SYNDICATE

How a Non-Interest-Bearing TI Loan Affects Your Lease Economics

When the landlord carries your tenant improvement allowance as a non-interest-bearing loan, the repayment structure directly impacts your effective rent. Unlike a traditional TI allowance that is simply granted (often amortized into base rent), a loan must be repaid over the lease term. This means your monthly occupancy cost increases by the amount of the loan repayment each month. However, because the loan carries no interest, you avoid the compounding cost that would come with a standard financing arrangement. The key trade-off is cash flow: you get the buildout funds upfront without paying interest, but you commit to higher monthly payments throughout the lease. This can be advantageous if you have limited capital at lease signing but expect steady revenue to cover the repayment schedule.

What to Watch For in the Loan Terms

Even though the loan is non-interest-bearing, the repayment structure can vary significantly. Some landlords require equal monthly installments over the lease term, while others may front-load or back-load payments. Pay close attention to whether the loan is tied to the lease term or a shorter period—if repayment is accelerated, your monthly burden increases. Also, clarify what happens if you terminate early or default: the outstanding loan balance may become due immediately, potentially creating a large financial liability. Finally, confirm that the loan is truly non-recourse to you personally (i.e., the landlord can only collect from your business, not your personal assets). A well-structured non-interest-bearing TI loan can be a useful tool, but poor terms can turn it into a hidden cost.

Key Negotiation Levers for a Non-Interest-Bearing TI Loan

When negotiating this structure, focus on three critical variables: the repayment term, the amortization schedule, and the trigger for repayment. A longer repayment term (e.g., matching the full lease term rather than a shorter period) reduces your monthly cash burden. You can also negotiate for deferred repayment — meaning you don't start paying back the loan until after your buildout is complete and you've opened for business. This gives you breathing room during construction. Additionally, clarify whether the loan is recourse or non-recourse. A non-recourse loan means the landlord can only collect from the space itself if you default, not from your broader business assets — which is far more tenant-friendly. Always get these terms in writing in the lease exhibit.

How This Compares to Other TI Funding Options

A non-interest-bearing TI loan sits between a free TI allowance (the best option) and a self-funded buildout (the most capital-intensive). If the landlord offers a free allowance, take it — you keep all your cash. But if they only offer a standard TI loan with interest, or if they want to raise rent significantly, this structure can still be superior to borrowing from a bank. The key comparison is your cost of capital: if your business earns a higher return on cash than the implicit cost of this loan (which is zero interest), it's a clear win. Also compare it to TI amortization in the base rent: some landlords prefer to increase rent by a fixed amount per year to cover the TI, which can be more expensive over time because you pay interest on that higher rent. A non-interest-bearing loan avoids that compounding effect.

Common Pitfalls to Avoid

Don't assume the loan is truly "non-interest-bearing" without checking the effective rent impact. Some landlords will raise your base rent by a percentage that effectively charges you interest on the TI loan, even if they call it "non-interest-bearing." Always calculate your net effective rent — total rent plus TI repayment divided by square footage — and compare it to market rates. Also avoid agreeing to a balloon payment at lease end; some landlords structure the loan so a large portion comes due when the lease expires, which can be a cash-flow disaster. Finally, ensure the TI loan is non-recourse and assignable — if you sublease or assign the lease later, you don't want to be stuck personally repaying the loan for a space you no longer occupy.

FAQ

What’s the difference between a TI allowance grant and a non-interest-bearing loan? A grant is free money from the landlord with no repayment, usually baked into higher base rent. A loan is an advance you repay over the lease term at 0% interest, preserving lower base rent.

Does the IRS tax a non-interest-bearing TI loan as income? No, because it’s a loan, not income — you’re obligated to repay it. However, the IRS may impute interest if the loan is below market rate, so consult a tax professional for your specific situation.

Can I negotiate a non-interest-bearing loan if my credit is weak? It’s harder — landlords prefer strong credit for loan structures because they bear the risk. You may need to offer a larger security deposit or a personal guarantee to get the deal done.

What happens if I break the lease early — do I still owe the loan balance? Yes, typically the unpaid balance becomes due immediately as a lump sum. Negotiate a sliding-scale early repayment penalty to reduce this risk.

Is a non-interest-bearing TI loan better than a bank loan for buildout costs? Usually yes, because bank loans charge interest and require collateral. The landlord’s loan is interest-free and secured only by the leasehold improvements, not your business assets.

How do I document the loan in the lease? Include a separate exhibit with the loan amount, repayment schedule, interest rate (0%), default terms, and prepayment rights. Have a real estate attorney review it before signing.

Sources

Building Owners and Managers Association (BOMA) International
The Real Estate Roundtable
National Association of Realtors (NAR) Commercial Division
CoreNet Global
Society of Industrial and Office Realtors (SIOR)
Institute of Real Estate Management (IREM)
U.S. Small Business Administration (SBA) 504 Loan Program
Journal of Corporate Real Estate

flowchart TD A[Tenant needs TI funding] --> B{Choose structure?} B --> C[Non-interest-bearing loan] B --> D[TI grant with higher rent] C --> E[Landlord advances lump sum] E --> F[Tenant repays over lease term at 0% interest] F --> G[Lower base rent preserved] G --> H[Net effective rent lower than grant option] D --> I[Landlord gives free money] I --> J[Higher base rent baked in] J --> K[Net effective rent higher] K --> L[Tenant pays more over time]

flowchart TD A[Tenant evaluates TI loan offer] --> B{Loan terms acceptable?} B -->|Yes| C[Proceed with non-interest-bearing loan] B -->|No| D{Alternatives?} D --> E[TI grant with higher rent] D --> F[Self-fund buildout] D --> G[Bank loan or SBA financing] C --> H[Sign lease with loan exhibit] E --> I[Sign lease with grant terms] F --> J[Use working capital for buildout] G --> K[Pay interest but no lease risk] H --> L[Lower rent, fixed repayment] I --> M[Higher rent, no repayment]

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![Should I negotiate for the landlord to carry my TI allowance as a non-interest-b](/assets/cro-cover-6.jpg)

## Direct Answer

**Yes, absolutely negotiate for a non-interest-bearing TI loan** — it’s one of the most powerful **cash-flow moves** a tenant can make, especially in a soft market. A **tenant improvement allowance** (TI) is typically either a direct grant (free money) or a loan repaid over the lease term. When the landlord carries it as a **non-interest-bearing loan**, you get the full TI amount upfront to build out your space, then repay it in equal installments over the lease term with **zero interest** — effectively an interest-free line of credit from your landlord. This preserves your **working capital** for your business instead of tying it up in construction, and it’s far cheaper than a bank loan or drawing on your own reserves. The catch: the landlord will likely want a higher **base rent** or a longer lease term to compensate for the risk, so you need to model the **net effective rent** to ensure you’re not paying more in total than if you took a lower rent and funded the buildout yourself. In most **Class A and B** office or retail deals, this is standard practice — but you must explicitly ask for it in the **letter of intent (LOI)** and have your broker run the numbers to prove it’s a win-win.

## The Mechanics of a Non-Interest-Bearing TI Loan

![Should I negotiate for the landlord to carry my TI allowance as a  — The Mechanics of a Non-Interest-Bearing TI Loan](/assets/cro-cover-6.jpg)


A **non-interest-bearing TI loan** works like this: the landlord gives you a lump sum to cover your buildout costs. You repay that amount over the lease term in equal monthly installments. There’s **no interest charged**, so the total repayment equals the original loan amount. This is fundamentally different from a **TI allowance grant**, where the landlord simply gives you the money with no repayment obligation — but that grant usually comes with a higher base rent baked in. The loan structure is common when the tenant wants a **lower base rent** but needs the cash upfront for construction. The landlord’s motivation: they secure a long-term lease with a creditworthy tenant, and the repayment stream offsets their risk. For the tenant, it’s a **zero-cost financing** tool that avoids bank fees, interest rates, and personal guarantees tied to a conventional loan. Always get the loan terms written into the **lease agreement** as an exhibit, specifying the repayment schedule, default consequences, and whether the loan is **recourse or non-recourse** to the tenant.

## When This Structure Benefits You Most

![Should I negotiate for the landlord to carry my TI allowance as a  — When This Structure Benefits You Most](/assets/cro-cover-6.jpg)


The non-interest-bearing TI loan is a **strategic weapon** in specific scenarios. First, **startups and growing companies** that need to conserve cash for hiring, inventory, or marketing — every dollar saved on buildout financing goes directly into business growth. Second, **tenants with strong credit** who can negotiate better terms because the landlord sees lower default risk. Third, **short-term leases** where a traditional TI grant would push rent too high — the loan lets you keep base rent lower while still getting the buildout funded. Fourth, **tenant improvements that exceed the standard TI allowance** — if the landlord offers a base allowance but your buildout costs more, the loan covers the gap without interest. Fifth, **multi-tenant floors** where the landlord wants a uniform buildout standard — they may offer a loan to align finishes. The downside: if your business fails or you break the lease early, you may owe the **unamortized balance** as a lump sum — a **default risk** you must model. Always negotiate a **cap on early repayment penalties** and a **sublease clause** that lets a new tenant assume the remaining loan balance.

## How to Model the Net Effective Rent

![Should I negotiate for the landlord to carry my TI allowance as a  — How to Model the Net Effective Rent](/assets/cro-cover-6.jpg)


You must calculate the **net effective rent (NER)** to compare a non-interest-bearing TI loan versus a higher base rent with a TI grant. Here’s the formula: NER = (Total Rent Paid Over Lease Term – TI Allowance) ÷ (Square Footage × Lease Months). For example, take a 10,000 sq ft space with a 10-year lease. Option A: landlord gives a non-interest-bearing loan (repayable over 10 years) with base rent at a certain rate per sq ft annually. Total rent is calculated over the term. Subtract the loan because you repay it, so net cash outflow equals total rent. NER is then derived from that net outflow divided by total square footage-months. Option B: landlord gives a TI grant (free money) but base rent is higher per sq ft annually. Total rent is higher. No repayment, so net outflow equals total rent. NER is higher. The loan option wins by a margin per sq ft per month — saving money annually in rent. Run this model with your actual numbers, including **operating expenses (NNN)** and **parking charges**, to see the true cost. A good broker will build a **lease abstraction model** that factors in rent escalations, free rent periods, and TI timing.

## Key Negotiation Points in the LOI

When you put the non-interest-bearing TI loan in the **LOI**, specify these terms clearly. First, **loan amount** — state the exact dollar figure or per-square-foot amount. Second, **repayment term** — match it to the lease term or a shorter period. Third, **interest rate** — explicitly say “0% interest” to avoid a later claim of imputed interest. Fourth, **amortization schedule** — monthly payments starting after the rent commencement date, not during any free rent period. Fifth, **default provisions** — if you default, the unpaid balance becomes due immediately, but negotiate a **cure period** of 30–60 days. Sixth, **subordination** — the loan should be subordinate to any senior debt the landlord holds, so it doesn’t trigger a cross-default. Seventh, **prepayment** — allow you to pay off the loan early without penalty if you sell the business or assign the lease. Eighth, **documentation** — require a separate **promissory note** or **loan agreement** attached as an exhibit to the lease. Your broker should push for these terms in the **proposal stage**, because once the lease is signed, the landlord has little incentive to amend.

## Risks and How to Mitigate Them

The biggest risk: **personal liability**. If the loan is **recourse** to the tenant entity and you personally guarantee the lease, a default could hit your personal assets. Mitigate by negotiating **non-recourse** language — the loan is secured only by the leasehold improvements, not your business or personal assets. Second risk: **accelerated repayment** on early termination. If you break the lease early on a long-term loan, you owe the remaining payments as a lump sum — potentially a large amount. Negotiate a **sliding scale** where the repayment amount decreases over time. Third risk: **hidden costs** — the landlord may add a “loan origination fee” or “administrative charge” that effectively creates interest. Demand a **zero-fee** clause. Fourth risk: **tax implications** — the IRS may treat the forgiven portion of a TI grant as taxable income, but a loan repayment is not income. Consult a **tax advisor** to confirm your jurisdiction’s rules. Fifth risk: **construction delays** — if the buildout runs over budget, you may need more than the loan amount. Negotiate a **contingency reserve** that the landlord can advance as an additional non-interest-bearing loan.

```mermaid
flowchart TD
    A[Tenant needs TI funding] --> B{Choose structure?}
    B --> C[Non-interest-bearing loan]
    B --> D[TI grant with higher rent]
    C --> E[Landlord advances lump sum]
    E --> F[Tenant repays over lease term at 0% interest]
    F --> G[Lower base rent preserved]
    G --> H[Net effective rent lower than grant option]
    D --> I[Landlord gives free money]
    I --> J[Higher base rent baked in]
    J --> K[Net effective rent higher]
    K --> L[Tenant pays more over time]
```

## When to Walk Away from This Structure

Don’t take the non-interest-bearing loan if the landlord uses it as a **smokescreen** to inflate base rent beyond what the market justifies. Run a **market comparables analysis** — if similar spaces in the building or area have base rent at a lower rate, and the landlord offers a higher rate with the loan, you’re overpaying. Walk away if the loan terms include **personal guarantees** that expose you to unlimited liability — better to fund the buildout with a **Small Business Administration (SBA) loan** at a reasonable interest rate. Also avoid if the lease term is too short to amortize the loan comfortably — a short lease with a large loan means high monthly payments, which could strain cash flow. If the landlord refuses to put the loan terms in writing as a separate exhibit, that’s a **red flag** — verbal promises are worthless in court. Finally, if your business has **uncertain revenue** or you’re in a volatile industry, the fixed repayment obligation adds leverage risk. In those cases, negotiate a **TI grant** instead, even if it means higher rent — the flexibility is worth the cost.

```mermaid
flowchart TD
    A[Tenant evaluates TI loan offer] --> B{Loan terms acceptable?}
    B -->|Yes| C[Proceed with non-interest-bearing loan]
    B -->|No| D{Alternatives?}
    D --> E[TI grant with higher rent]
    D --> F[Self-fund buildout]
    D --> G[Bank loan or SBA financing]
    C --> H[Sign lease with loan exhibit]
    E --> I[Sign lease with grant terms]
    F --> J[Use working capital for buildout]
    G --> K[Pay interest but no lease risk]
    H --> L[Lower rent, fixed repayment]
    I --> M[Higher rent, no repayment]
```

## How a Non-Interest-Bearing TI Loan Affects Your Lease Economics

When the landlord carries your tenant improvement allowance as a non-interest-bearing loan, the repayment structure directly impacts your effective rent. Unlike a traditional TI allowance that is simply granted (often amortized into base rent), a loan must be repaid over the lease term. This means your monthly occupancy cost increases by the amount of the loan repayment each month. However, because the loan carries no interest, you avoid the compounding cost that would come with a standard financing arrangement. The key trade-off is cash flow: you get the buildout funds upfront without paying interest, but you commit to higher monthly payments throughout the lease. This can be advantageous if you have limited capital at lease signing but expect steady revenue to cover the repayment schedule.

## What to Watch For in the Loan Terms

Even though the loan is non-interest-bearing, the repayment structure can vary significantly. Some landlords require equal monthly installments over the lease term, while others may front-load or back-load payments. Pay close attention to whether the loan is tied to the lease term or a shorter period—if repayment is accelerated, your monthly burden increases. Also, clarify what happens if you terminate early or default: the outstanding loan balance may become due immediately, potentially creating a large financial liability. Finally, confirm that the loan is truly non-recourse to you personally (i.e., the landlord can only collect from your business, not your personal assets). A well-structured non-interest-bearing TI loan can be a useful tool, but poor terms can turn it into a hidden cost.

## Key Negotiation Levers for a Non-Interest-Bearing TI Loan

When negotiating this structure, focus on three critical variables: **the repayment term**, **the amortization schedule**, and **the trigger for repayment**. A longer repayment term (e.g., matching the full lease term rather than a shorter period) reduces your monthly cash burden. You can also negotiate for **deferred repayment** — meaning you don't start paying back the loan until after your buildout is complete and you've opened for business. This gives you breathing room during construction. Additionally, clarify whether the loan is **recourse or non-recourse**. A non-recourse loan means the landlord can only collect from the space itself if you default, not from your broader business assets — which is far more tenant-friendly. Always get these terms in writing in the lease exhibit.

## How This Compares to Other TI Funding Options

A non-interest-bearing TI loan sits between a **free TI allowance** (the best option) and a **self-funded buildout** (the most capital-intensive). If the landlord offers a free allowance, take it — you keep all your cash. But if they only offer a standard TI loan with interest, or if they want to raise rent significantly, this structure can still be superior to borrowing from a bank. The key comparison is your **cost of capital**: if your business earns a higher return on cash than the implicit cost of this loan (which is zero interest), it's a clear win. Also compare it to **TI amortization** in the base rent: some landlords prefer to increase rent by a fixed amount per year to cover the TI, which can be more expensive over time because you pay interest on that higher rent. A non-interest-bearing loan avoids that compounding effect.

## Common Pitfalls to Avoid

Don't assume the loan is truly "non-interest-bearing" without checking the **effective rent impact**. Some landlords will raise your base rent by a percentage that effectively charges you interest on the TI loan, even if they call it "non-interest-bearing." Always calculate your **net effective rent** — total rent plus TI repayment divided by square footage — and compare it to market rates. Also avoid agreeing to a **balloon payment** at lease end; some landlords structure the loan so a large portion comes due when the lease expires, which can be a cash-flow disaster. Finally, ensure the TI loan is **non-recourse** and **assignable** — if you sublease or assign the lease later, you don't want to be stuck personally repaying the loan for a space you no longer occupy.

## FAQ

**What’s the difference between a TI allowance grant and a non-interest-bearing loan?**
A grant is free money from the landlord with no repayment, usually baked into higher base rent. A loan is an advance you repay over the lease term at 0% interest, preserving lower base rent.

**Does the IRS tax a non-interest-bearing TI loan as income?**
No, because it’s a loan, not income — you’re obligated to repay it. However, the IRS may impute interest if the loan is below market rate, so consult a tax professional for your specific situation.

**Can I negotiate a non-interest-bearing loan if my credit is weak?**
It’s harder — landlords prefer strong credit for loan structures because they bear the risk. You may need to offer a larger security deposit or a personal guarantee to get the deal done.

**What happens if I break the lease early — do I still owe the loan balance?**
Yes, typically the unpaid balance becomes due immediately as a lump sum. Negotiate a sliding-scale early repayment penalty to reduce this risk.

**Is a non-interest-bearing TI loan better than a bank loan for buildout costs?**
Usually yes, because bank loans charge interest and require collateral. The landlord’s loan is interest-free and secured only by the leasehold improvements, not your business assets.

**How do I document the loan in the lease?**
Include a separate exhibit with the loan amount, repayment schedule, interest rate (0%), default terms, and prepayment rights. Have a real estate attorney review it before signing.

## Sources

- Building Owners and Managers Association (BOMA) International
- The Real Estate Roundtable
- National Association of Realtors (NAR) Commercial Division
- CoreNet Global
- Society of Industrial and Office Realtors (SIOR)
- Institute of Real Estate Management (IREM)
- U.S. Small Business Administration (SBA) 504 Loan Program
- Journal of Corporate Real Estate

## Related on PULSE

- Explore more in the PULSE library.

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