Commercial lenders are willing to give you a commercial loan modification by offering you a number of different ways to modify your loan. The lender may be willing to reduce your interest rate, extend your loan term, offer you interest only payments and allow you to delay paying the default amount on your loan. If your business is not generating enough revenues, a commercial loan modification can help you prevent foreclosure by modifying your loan so that you can afford your monthly mortgage payment, keep your property and stay in business.
Reducing the interest rate will allow you to increase your cash flow. This is good for commercial property owners who have a high vacancy factor. This way you can afford your payment until the vacancies are filled. Extending your loan term can help you avoid any balloon payments or pre-payment penalties. Your lender may charge you a point or two to extend your term or extend it at a higher rate. Try and negotiate no points and a lower interest rate if you can. Some lenders will allow you to stop paying your payments for a short term of 3-6 months so you can build your cash reserves and fill your vacancies or generate more business income.
Factors Your Lender Will Consider
A commercial modification is based upon the type of commercial property you own, your cash flow, vacancy factor and your borrowing strength. You need to show your lender that your business financial hardship is a temporary one, and that your business will recover. You should be proactive in finding a solution that works for you and your lender. It is also a smart idea to consult with a commercial real estate attorney to find out all your options, and to have the attorney assist you with the modification process and negotiations.
The Process
The modification process takes anywhere from 45 to 90 days after you submit an application and financial information. It requires an extensive amount of paperwork. Here is a list of items that you will need to present to your lender in order to get your modification approved:
- Current and past two year’s rent roll
- Current Income and Expense Statement
- Most recent mortgage statement
- Personal financial statement
- Information regarding your tenants
It is a good idea to call your lender every couple weeks to find out the status of your application. Don't ignore any correspondence or notices. Keep your lender advised of your intentions. Once your lender reviews the documentation, they will let you know whether or not your modification has been approved.
Speak with an Attorney
A modification attorney can explain the modification process to you, and answer your questions. When you have an attorney representing you, your comerci8al lender will take your modification much more serious.
