Refinancing Commercial Loan - best options?

[Amber Cerone]

Before I decided to educate myself on REI, I jumped into an offer on a commercial condo to open a retail shop. Based on that, we got a conventional commercial loan with the terms of:

1. Can only use the loan proceeds to open the shop, no other purposes

2. 5 year pre-payment penalty 

3. 10 year balloon, 20% down

Since then, we’ve decided our best move with this property is to renovate it into a residential condo and either rent it or flip it. Well, we are closing in a week so it’s too late to change the type of loan without losing the deal. My thought is to close with the commercial loan then refinance to something more like a rehab or investment loan. 
I originally thought I could just keep the commercial loan and renovate into a rental. But I am ignorant enough to not know whether I will “get in trouble” for changing the use. I have been told that with the commercial loan through the credit union, I have to provide financials annually.
I would love to get some insight from those of you who are deeply involved in this area. The numbers on the property are:

Cost: $250k, Reno $45k, ARV: $400k

Thank you!