What is a commercial loan modification?

This recent economic downturn has left many commercial lenders with an enormous amount of loans in default or heading into default.  This has created opportunity for borrowers facing financial hardships.  Lenders have over leveraged themselves and now find it in their best interest to negotiate with borrowers rather than foreclose on them.  With the risk of these loans going into default there is a potential of a second wave of foreclosures following the recent residential lending crisis.  The banks are now willing to work with commercial borrowers to avoid bankruptcy and save the bank the expense of going through the entire foreclosure process.

A commercial loan modification may lower a borrower’s monthly payments so they can continue to effectively owning and operating their properties.  A loan modification will allow borrowers to avoid losing their assets and destroying their credit with bankruptcy or foreclosure.  Additionally, the commercial modification will allow banks to stay in the business of lending and not property management and brokerage.

Often a commercial loan modification can reduce the amount of interest paid by the borrower or even lower the principal amount of the loan still owed.  A loan modification is available to both businesses and individuals that own commercial properties such as strip malls, apartment buildings, shopping centers, office buildings, industrial buildings, gas stations, or properties under construction.  In a successfully negotiated commercial loan modification, the bank agrees with the borrower to temporarily or permanently change the terms of the original note thus lowering the overall monthly payment.  This can be accomplished with many strategies including but not limited to a lower interest rate, a principal reduction, a longer payment schedule or a combination of these strategies.

Do I qualify for a commercial loan modification?

There are many factors that determine whether a lender will agree to a loan modification.  The eligibility is based on several complex factors that are not related to the residential loan modifications.

The following are several of the most important factors:

1)    Equity position in regards to today’s value

2)    Loan to value ratio

3)    Income generated from the property

4)    Credit worthiness of the borrower

5)    Payment history of the borrower

6)    the reasons for the hardship

Another critical factor in determining whether or not a borrower will qualify for a modification is whether the borrower will be able to continue to make the payments on the modified loan.  Unlike residential modifications, there is not a defined list of items needed and they are handled on a case by case situation to determine eligibility.

Our experienced real estate brokers and mortgage bankers will conduct a comprehensive analysis of your property and determine whether a commercial loan modification is a possible course of action with respect to your property and situation.

If a commercial loan modification is an option, our professional staff will prepare a proposal on your behalf to your lender.  This proposal will strive to modify your loan in a manner that will once again make owning your property profitable while at the same time addressing your lenders basic concerns on whether or not to foreclose on another property.

Please call 847.829.4411 or email mike@buildingcashflow.com for a FREE consultation to determine your eligibility.  The call will cost you nothing, but the outcome may save your property!