Any commercial loan modification will require a commercial loan audit. The audit doesn’t preclude going over your business plans, your accounting for the property, lease agreements and other pertinent documents. Tenants may be interviewed during the modification process with your bank. And as site visits are common with residential foreclosures, you can expect to receive a few visits by bank representatives to your commercial property.
Before negotiations begin on your modification, a commercial loan audit will deploy bank staff to you and your property to assess the long term viability of your commercial property. It could very well be concluded by the bank that your property isn’t viable, in which case the bank will consider letting you default on your loan, cutting its losses, and then ultimately commencing foreclosure proceedings, forgoing any commercial loan Workout. It could be the case, however, that the general market conditions have weakened the pro forma of your property, and the dip in market conditions have made for the slight difference between being able to make payments and not. Many commercial developers are in this slim margin situation and the federal government has released funds to lenders in order to incentivize a prudent commercial loan Workout over a default. Still, commercial loan modification proceedings are stringent, and no punches will be pulled by the banks during this painful restructuring. Though you’ll be in a relatively vulnerable position to the bank, realize that if the bank’s analysis deems your property financially viable, it will have an interest in seeing you see through a mortgage to maturity, and will also want to get into a commercial loan renegotiation with you.
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