Because of the current economic crisis being experienced in the United States, individuals are going through a tough time with their finances and their mortgages. Some have even filed for bankruptcy and have allowed their homes to be foreclosed without even trying to find a way to rescue them. This economic issue seems to have affected everyone, including businesses. Several companies which have an existing loan are unable to pay their interest rates. Because of this troubling situation, there has been some incentive programs which the current administration, led by President Obama, has initiated. Such programs are even available to businessmen in the form of commercial loan modification.
The problem though, is that this program is often neglected because everyone else is concentrating on the residential issues. But even so, there is an alarming number of commercial loans which might never be settled if business owners will not be given any help. Currently, there are $83 billion commercial loans evading. But this number has not stopped, because there is still another trillion dollars which will be due by the end of 2010. There is also a projected additional trillion dollars through 2012. If things get out of hand, there will be no more opportunities for businesses.
In order to apply for the loan modification for your business, there are some paper work needed. The success or failure of your application highly depends on your current Borrower Strength, Vacancy rate and NOI. So that this application process is shortened, here are some of the things which your lender will require from you: your current rent roll, current Income and Expense Report, Historical Rent Roll, Updated Personal Financial Statement, current Mortgage Statement, and the tenant profiles which describe the larger tenants.
Once approved, the modification of your business loan will depend on your property type, vacancy rate, current cash flow, and your own borrower strength. An example for this is: if you possess an apartment building which had a 98% occupancy in 2007 and in 2008 but currently is only at 89%, the loan modification would only aim to operate during the adjustment Net Operating Income or NOI.
Unfortunately however, commercial rates have been increased to 200 basis points as compared to their counterparts in the residential arena. Because of this, getting a fixed rate from your lender is getting harder every week. This also leads banks to have an adjustable rate along with an attitude of “take it or leave it” which lets the business owner have no other available options.
If you are one of the business owners which would want to get a commercial loan modification and you can still wait for one or two years, then be patient. As soon as the economy stabilizes once more, borrowers will be able to have more options and control of their own situation.
