What You Need to Know About Commercial Loan Review

A commercial loan modification is possible for owners of properties like strip malls, office buildings, multi-tenant buildings, shopping malls, etc. and this can be done by applying for it with a bank or a lender. Such modifications may include one or a combination of the following benefits: a decrease in the interest rates or even on the principal loan, interests only mode of payments for a specified period of time, extended duration, and even a reduction on the amount that is due on the debt. However, before the creditors can go and approve the aforementioned modifications to the agreement, a commercial loan review must be performed first.

A commercial loan review usually involves an analysis of the financial documents required from a borrower. It is important that both the borrower and lender be in full agreement of the terms of the review and that both parties are fully involved in the process of the review. Most of the time, lenders suggest a loan workout to the borrowers first because they discover later on that the borrowers have defaulted on the monthly payments due to the tough economic situation these days. Keep in mind though, that while some may only need breathing time and space to recover from their current financial difficulties, some may need to resort to more permanent changes in order to keep the business afloat. These procedures would benefit the creditors because they can avoid the added costs of foreclosing a property while still be able to receive monthly payments from the borrower – although the payments are already lessened.

Another option for borrowers to avoid foreclosure is to consider commercial short sales which, compared to the amount of damage a foreclosure would have on a business owner’s credit standing, is admittedly less; however, a negative mark it will remain. Creditors make use of the commercial loan review to determine if a business owner would be capable of making the assigned monthly payments after modification has been granted. Factors like trends in the business’ cash flow, history of payments, market conditions, the presence of the guarantors are taken into consideration when determining the credit worthiness of a specific property or business.

The commercial loan review process is a little different when you look at it from the borrower’s point of view. At this point, loss mitigation attorneys would need to help the property owners in order to carefully study the terms and clauses that are included in the original agreement. The reason being that certain clauses and terms that are on the original agreement may not benefit the borrower at all. If violations and inaccuracies are found by the mitigation attorney, the lenders would automatically forfeit its right to impose the agreement’s provisions to the borrowers, even the details that lead to a property’s foreclosure. There are even instances that the lenders would be required to return all of the interest payments made by the borrower at the start of the agreement. So what a commercial loan review does primarily, is to give the borrowers a chance at negotiating for agreeable terms on their existing agreements.

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