Commercial loan modification is a viable alternative for property owners looking for loan relief.

When loan modifications first became all the rage, the focus was entirely on residential mortgages and helping what has become known as “Main Street.”

But as the problem has grown, commercial real estate is becoming more and more of a concern as well. Large and small buildings alike are facing the same fate that homeowners across America have become all too familiar with.

Everyone is quickly discovering that the problem isn’t just bad loans, or irresponsible people. It’s much more and it’s bigger than any individual or business can control (unless you happen to be a prominent bank).

If you find your commercial property needs a business loan modification, that’s okay. In fact, it’s a smart business decision that could result in you savings tens or hundreds of thousands of dollars.

Trillions of Dollars at Stake

Martin Andelman of the popular blog Mandelman Matters recently cited a Deutsche Bank report that states $2 trillion in commercial mortgages will need to be refinanced by 2013.

With values plummeting in the commercial market much the way they did to residential homes, refinancing is going to be a difficult proposition.

Already, business parks, strip malls, office buildings and so on are facing the reality of a stressed market that is making these properties downright unaffordable.

It is becoming more and more accepted that these loans must be modified to keep stability in the marketplace. If not, we could be facing an epidemic that goes beyond anything seen in the residential market.

How You Can Be Helped

Loan modifications have been getting done throughout the current housing market downturn. As demand has dictated, the commercial market has become part of this trend.

Commercial loans are a different beast and demand an experienced hand to secure a permanent modification. Consult with a third party company that has experience doing commercial loan modifications.

When you consider the thousands of dollars you could save on a monthly basis with a modification, having an experienced company lead the way is an investment you can’t afford to ignore.

Declining values, which have been such a prominent problem in the housing industry, have dealt a blow to numerous commercially-owned properties.

What has happened is that in difficult times, numerous businesses have had to either closed their doors or dramatically cut back. As a result, commercial property owners have seen their rent rolls dramatically reduced leading to less income which of course means less ability to pay the mortgage.

It’s similar to when an individual loses his or her job and no longer has the same money to pay back a home loan that was otherwise affordable.

Because values are so closely tied to how much money the building can make, these commercial properties aren’t getting the same valuation when the owner applies for a refinance. This causes it to get turned down and the owner has a loan that is simply not affordable in current market conditions.

Using Commercial Loan Modification to Remedy the Problem

The idea of commercial loan modification is the same as with homes. Modify existing terms that are otherwise impossible to remedy through negotiations with the lien holder.

The entity backing the mortgage has incentive to modify in order to avoid foreclosure while the owner needs a solution to keep the building operable.

With $1.4 trillion in commercial loans coming due between 2010 and 2014 and a large percentage (reportedly as much as 65%) of these loans being impossible to refinance, modification is essential to not only individual property owners, but the nation’s economy as a whole.

In other words, if you have a property that has an increased vacancy rate due to the economic downturn, will a modification make the property operable and can you continue to make those new payment?

In some cases, it will make sense. In others, the property may be in a situation where modifying the loan simply won’t make a big enough difference to justify the action.

The following are a couple of things that are important to the qualifying process.

Consultation

The first step is to conduct a consultation about your situation with a loss mitigation professional. It’ll be important to discuss the challenges you face with your property and make a determination of what you can reasonably afford based on your current finances.

There’s a lot of value in speaking with someone about this. Experienced professionals often make a huge difference in securing a good outcome.

Documentation

The lender is going to require a lot of paperwork. Income and expense reports, a business plan, authorizations, bank statements, tax returns and so on are all important to the process. Your lender is going to verify everything you report, so it’s vital to back it up with substantiated evidence.

A professional loan modification firm can make this aspect as simple for you as possible through streamlined processes, but it will be important that you are attentive to requests for information and documentation.

Basically, if the use of the establishment is commercial in nature, it could be eligible for loan restructuring. Consider that any of the following qualify:

• Strip malls
• Shopping centers
• Warehouses
• Industrial complexes
• Office buildings
• Business parks
• Health care facilities
• Hotels, motels and resorts
• Apartment complexes
• Condominiums
• Restaurants
• Gas stations
• Entertainment facilities

Even if you don’t see your property type listed doesn’t mean it isn’t eligible. There are just too many to mention.

As such, like homeowners everywhere, the idea of restructuring your loan in a manner that is more affordable is an attractive possibility.

Commercial loan workouts are gaining steam. A lot of loans were done in the mid 2000s that are turning out to be unfavorable and because so many of them are non-recourse, banks are having no choice but to work with you.

Case in point, we recently had a client come to us with a couple of retail properties that he needed help with. His mortgage payment was too high and refinancing had been deemed impossible. Enter the commercial loan workout.

Once we put a solid package together based on his cash flow situation and a couple of other influential factors, the bank quickly saw the value in getting something done. In fact, the process went smoother than most residential deals and in the end, our client had cut his monthly payment by 25%.

Think a debt restructuring like that might make a difference to your cash flow situation? Probably so. Learn more about our commercial loan workout program.

Commercial debt restructuring is a favorable and completely viable option for commercial property owners when traditional refinancing is not available. The banks are listening but not without an an air-tight proposal that makes financial sense.

Companies engaged in commercial debt restructuring have insight into what kind of numbers the banks want to see and can put together a package that has your financial situation turned around in as little as 30-60 days.

Any commercial property including apartment complexes, industrial buildings, office space and retail shops may qualify.

To learn more about commercial debt restructuring, visit our commercial page at http://www.amlgloanmodification.com/commercial-loan-modification.

However, these properties face the same issues as homeowners. Lower values and lack of financing are pushing more and more commercial properties into foreclosure.

Commercial Loan Workout

A commercial loan workout involves the amendment of the current loan to meet current market conditions. The end goal is to provide an affordable loan that the mortgagee can pay back so that the mortgagor isn’t stuck holding a property it doesn’t want. Banks are not property managers. They don’t want to foreclose and end up with the day to day hassles and expenses. It is in their best interest to keep its borrowers paying the mortgage on a regular basis.

In general, commercial properties consist of a variety of types:

• Condominiums and apartment complexes
• Strip malls
• Office buildings and complexes
• Business parks
• Industrial and Manufacturing Warehouses
• Shopping centers

The list goes on. If you are currently paying a mortgage on a building used for commercial purposes, you can assume your property type would qualify.

What are the solutions?

A modification is a modification whether it’s residential or commercial. In this case, the results will be based on whether or not you can show a property that will survive on modified payments. If so, the savings will be significant.

As with many commercial deals, typical outcomes involve a five year term modified to an affordable level. Other modification options are possible as well, but it’s ultimately going to depend on your situation and what the data is indicating makes the most sense.

The idea through your commercial loan workout is simply to make a permanent change to the terms of the loan that is beneficial to both borrower and bank in situations where traditional methods such as refinancing are not an option.

However, the concepts are still the same. If you don’t make enough money now, at what level will you be able to afford payments in the future?

It’s just that the number crunching is more complex.

One thing that figures prominently into the commercial modification process is a business plan. Your mortgagor is going to want details of how the restructuring is going to prove worthy in the long run.

Just as is the case with an individual, you will have to show the property making enough profit to justify the modification.

The bank will ask for details and will want to see hard evidence that (1) your current situation dictates a change and (2) your future situation makes financial sense for both parties.

Documentation Needed

Again, many commercial documents are similar to those requested in the residential process.

Items such as a hardship letter, authorization forms, and bank and mortgage statements will all be requested.

In breaking down expenses and income, you’ll need to provide rent rolls, operational income, an operating expense statement and short term budget. Business tax returns will also be necessary.

Also, as mentioned above, an updated business plan will be necessary.

A professional firm can represent you and present everything as one, clean package to the lender.

The Waiting Game

With a detailed presentation given to the lender, aggressive negotiations are necessary to keep the lender involved and let them know you mean business.

However, it takes patience. Depending on the lender, it could take months to reach an agreement on a restructured deal.You’ll want to prepare yourself mentally for a drawn out process.

Again, you many want to consider professional help to ensure someone is always on top of your file and keeping the negotiations going strong.