Start with the index, spread and floor
A floating rate can be expressed as an index plus a spread, subject to a floor. SOFR is a secured overnight reference rate published by the Federal Reserve Bank of New York; a loan may use a term or compounded convention specified in its documents. Check the reset dates and convention instead of assuming every SOFR loan accrues the same way.
Compare cash required and total dollars paid
For a hypothetical $10 million interest-only loan at 10% for twelve months, simple interest is $1 million. A 1% origination fee adds $100,000. A 0.5% exit fee adds $50,000. That produces $1.15 million before legal, report, extension or other costs. The example is arithmetic using assumed terms, not an H Equities quote or an APR calculation.
Reserves change proceeds
A $500,000 interest reserve withheld from a $10 million loan reduces available proceeds unless financed outside that amount. Avoid treating the reserve both as an immediate expense and again as the interest it later pays. Separate gross commitment, funded balance, holdbacks and net closing proceeds.
Questions before comparing term sheets
Ask how interest is calculated and collected, whether minimum interest applies, which fees are earned if the deal does not close, what an extension costs and what conditions apply. Model a delayed exit and verify whether the rate cap, reserve and maturity cover it.