When the real estate market imploded a few years ago, commercial properties felt the hit too. And while things are finally starting to look up, no property owner is out of the woods yet.

Real Estate for the Small Business Owner

Most small business owners have been accosted with a slew of real estate based troubles. First, a new business has to consider the pros and cons of investing in commercial property. Once that step has been taken, there is great effort to be made in keeping up with the mortgage as your business tries to garner momentum towards success.

What happens when the mortgage becomes overwhelming? When the downturn in the economy directly affects your bottom line?

While many have heard about residential loan modifications, small business owners may find themselves in a modification dilemma as well.

Here are some tips small business owners should consider when a commercial loan gets out of hand.

Be Proactive

Commercial loan modifications are called workout loans. The idea, of course, is that with the new repayment plan, you’ll be able to work out whatever business glitches you’re encountering and thereby return to profitability.

The important thing to remember here is: you must be proactive. Contact your lender before your loan goes into arrears. Your diligence and legitimate desire to make things right with the lender will shine favorably on your modification attempts.

Be forewarned that in some instances, contacting the lender prior to experiencing late payments may not initiate a move towards modification on their end. They tend to think all is well until there’s a late payment. However, don’t let that position hinder you from calling. Once again, being proactive is essential!

Be Prepared

When you get in contact with your lender, it will be in your best interest, and most effective, if you have some documents at your fingertips.  The following documents should be readily available to you while you’re on the phone with your mortgage holder:

  • A hardship letter that explains why you need this modification.
  • Your current business plan.
  • Recent (perhaps all) tax returns.
  • Any additional financial documentation.
Being prepared will enable the lender to understand the import of restructuring your loan. They don’t want your loan to go into default either.

Schedule a Meeting

Sometimes things are better off done face to face. Certainly the legitimate concern you are experiencing will show in your facial expressions and body language. In addition, the lender will be able to have, in hand, the actual documentation, not just computer generated images of it.

If your lender isn’t available, or if you’re not prepared to negotiate on your own, you might consider hiring someone else to work on your behalf (like a loan modification attorney). However, if you’re able to take care of it, prepare all your documentation and ask the lender how to proceed with the modification process.

It’s possible that they will offer you the chance to refinance. While closing costs are probably going to be tacked on, they might be able to add them into the refinanced amount. Check with them about these options.

Ask Questions!

If you’re given the opportunity to refinance or modify your loan, there will be several things to consider. Sometimes modifications include lengthening the repayment time on the loan in order to decrease the monthly payment. In other instances, there’s an upfront fee for the modification process. Ask questions. Make sure that everything the lender is suggesting is going to be doable for your operation. Don’t agree to a repayment plan that is ultimately going to fail. Ask questions about everything—fees, interest rates, length of the loan, etc.

Modify Your Commercial Loan

Commercial loans can be modified just like residential ones. There’s no reason your business should go under simply because you’re experiencing a rough patch.

Jessica AdamsAuthor: Jessica Adams writes for Ziegler Law Office—a loan modification attorney in Clearwater. As a loan modification lawyer, the company has helped both small business owners and homeowners establish financial stability.

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