Ok let me make this easy for you.
use table 1 (because this is the classification of your loan and purpose)
us in the long term section, under the compouding column you choose for your loan instrumet. (you can pick, etc. I recommend monthly, but you may choose annual, etc.)
Use the top line only, NOT the ones with the percentages. the line across the top that says AFR with no precentage. (this will meet the requirements of the IRS)
The commercial lender would use a diffent table and lines. Forget what I said about the 250,000 loan.
If you write a note for a 9 year or less note, you can choose the lower midterm rate, and it will not raise a flag. If it did, the IRS would want to see the note, and as long as the note was for a 9 year loan, then it would be ok.