(Commercial mortgage modification is a restructuring of your existing loan to make the payments more affordable.)Commercial mortgage defaults fall into one of two categories: 1) debt service default and 2) balloon payment default. 2) Will a commercial mortgage modification work?
a. Prospects for your business. Is business picking up? Your exit plan (and the bank's) should never be overlooked when considering a commercial mortgage modification.
For the business owner considering a commercial mortgage modification, an assessment of the company's future, and the mortgage holder's own goals can help in deciding whether a modification is the answer to your problems, or an exercise in futility. If your long terms goals do not sync with the mortgage modification plan, then even if you obtain a commercial mortgage modification, it is likely to fail sometime later down the road.4) Consider the pros and cons of bankruptcy The United States commercial bankruptcy statutes including Chapter 11 are specifically aimed to aid persons who are unable to pay business debt.
Commercial bankruptcy may be able to be avoided, if you still have some cash flow into the business and you can restructure your debts, including commercial mortgage modification, to improve your debt service coverage ratio (i.e., so you are back in the black every month). The cause of the problem, whether modification will work, your long term goals, and the pros and cons of bankruptcy should be among your major considerations.
Business Bankruptcy Alternatives - Commercial Mortgage Modification
European banks, including those in the U.K., Spain and Ireland, have high exposure to the crisis-hit commercial real estate sector, and some of them could face negative rating actions as loan losses peak next year, Fitch Ratings said in a report today."
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