What Is the Commercial Loan Modification Process?

Commercial loan modification processing is specific to the type commercial loan, the amount due in that loan and the credit history and current financial circumstances of the business and business owner at issue.  There is no single process but rather a series of processes that may be applied by the lender if indicated.  The process differs in view of the terms of a small business loan for a sole proprietor as against the terms of a large corporate entity loan often involving many individual shareholder loan co-signers.  Most large corporate entities employ legal and accountant teams to represent their interests with a bank or other lender so in light of that fact this article will focus on small business related commercial loan modification requests.

Small Business/Sole Proprietor

Even in a small business commercial loan modification processing and review will depend on the type of business.  There are some general processing elements that all small businesses can expect that are detailed below:

• Bank Cost Analysis - The lender is going to be looking to protect its own interests and will look to whether it would cost more to engage in a foreclosure process then to simply modify the existing loan.  The business owner must find a way to convince the lender that continued loan repayment albeit on an altered basis is the most cost effective plan to benefit the bank and not for the benefit of the business owner.   

• Businesses Involving Multi-family Real Estate - Businesses that involve rental properties where a foreclosure would threaten to displace multiple family residents are often given flexibility that other non-domiciliary businesses would not be given just for the reason the residential homes are at issue.  Usually these types of businesses will encounter a mortgage modification process that is similar to that faced by single residence home owner dealing with debt threatening a foreclosure on a single family home.    

• New Business Plan Needed - The old plan ran into some kinks and didn’t produce the expected results but the lender may still be willing to listen to your plan.  Draft a new business plan showing the lender that the business owner acknowledges the business challenges but has worked to isolated methods that will correct present financial shortcomings and even supersede repayment of the present deficit amounts.  Detail all reasonable new avenues for bringing money into the business that are concrete in nature; speculation or risk of any kind can no longer to be tolerated.  

Getting Legal Help

If you or your employer is interested in seeking a small business loan modification with a lender and would like to have legal assistance in requesting repayment agreement alterations to the terms of a commercial loan then it would be important to contact a foreclosure attorney to discuss the business’s current financial circumstances as soon as possible.