Commercial Loan Workout – Alternative Debt Restructuring
Commercial property owners are experiencing many of the same difficulties that residential home owners have become all too familiar with.
Unaffordable payments and dropping value along with unforeseen hardships have put numerous commercial properties in precarious financial positions.
A commercial property is a different situation than that of a residential home, however. Someone’s home is much more of an emotional attachment whereas the bottom line in commercial real estate is, well, the bottom line.
When rent rolls drop and a property’s cash flow takes a hit, the overall value of the property is effected and what was once an affordable mortgage payment is now upside down compared to the income being produced.
There is a Solution – Commercial Loan Modification
What do you do when the above scenario is in effect? A refinance isn’t possible. The lender will turn that down. Enter the commercial loan workout. You might also see it referred to as commercial loan modification or commercial debt restructuring. It’s the same concept as a home loan modification where the goal is to restructure your loan in such a way that it becomes affordable for you to continue owning the property.
Bringing your mortgage payment in line with your business reality makes fiscal sense for the bank and you. By no means is it an easy process, but a commercial loan workout is achievable. Virtually any property type is eligible.
Importance of Commercial Loan Workout Programs in a Distressed and Growing Market
The commercial loan market has been suffering for some time now. For the most part, it hasn’t made headlines, but it’s a significant problem. How significant? Some estimates have said that $2 trillion in commercial real estate is coming due by 2013 with as high as 65% of that total not eligible to refinance due to declining values and economic hardships.
Without a commercial loan modification, those loans could easily default and send the U.S. economy into a tailspin. Real estate owners who find themselves with unaffordable buildings should explore the possibility of a commercial loan workout as an alternative when refinancing doesn’t work. As long as the rent roll shows some positive signs and cash flow can be positively affected through the commercial debt restructuring, commercial loan modification is a completely viable option.
With values still declining and businesses falling off, commercial property defaults are going to remain a big issue facing the American economy. This program is the best available option and can be the difference between foreclosure and continuing to successfully operate.
