This paper introduces a general option-valuation framework for loans that provides valuation information at loan origination and supports mark-to-market analysis, portfolio credit risk and asset and liability management for the entire portfolio. We describe, in detail, the main structures found in commercial loans and the practical assumptions required to model the state-contingent cash flows resulting from these structures. We stress the need to account properly for the embedded options such as prepayment, revolvers, and grid pricing. The characteristics of the credit risk model necessary to capture the main features of the problem are described. A case study is used to addressed the data available in practice , calibration methodologies and the impact of various modelling assumptions. Finally, we outline some of the computational challenges of performing portfolio mark-to-market and risk measurement and discuss various solutions. Though we focus primarily on large corporate and middle-market loans, the approach is applicable more generally to bonds and credit derivatives.