What You Need to Know About Commercial Real Estate Loan Workouts

 Posted on November 27, 2019 in Loan Modification

When you default on a loan for a commercial real estate project, it is easy to fear the worst. However, there are often many options for investors looking for assistance with getting a forbearance or a workout agreement with the lender. In order to protect your investment, however, you will need to act quickly.

Alternatives to Bankruptcy

In many parts of the country, the commercial real estate sector has continued to experience its share of challenges, leaving many businesses and investors in a cash crunch and unable to pay their loans. Some people mistakenly believe that the only way out of a default or distressed loan is bankruptcy. However, there are often other options available. 

With the help of a knowledgeable lawyer, you might be able to negotiate an agreement with the lender that avoids a foreclosure and bankruptcy. Lenders often do not want to deal with a foreclosure any more than you do. In fact, if you will eventually be able to get your loan caught up, it will usually make the most financial sense for your lender to work out some type of arrangement with you. With careful representation, you may be able to secure a forbearance agreement with the lender that gives you more time to get current on the loan.

Sometimes, however, no matter how much time you have, you will not be able to rescue the distressed loan under its existing terms. In cases like this, a workout agreement with the lender may be the best option for both sides. A workout is a modification of the loan’s terms that is intended to allow you to rehabilitate the loan.

Understanding Your True Position

When dealing with the lender, it is important to understand exactly where you and your property stand financially and in the overall market. When you are asking the lender for forbearance or a workout, you must convince them that you are not just asking to postpone the inevitable. The lender must be able to see the workout or forbearance as being in their best interest.

With that in mind, you should have the following prepared:

• An up-to-date accounting of the property’s tenancy
• Appraisals or broker opinions of the property’s value
• A realistic business plan for the near and long-term future
• Your proposed workout agreement

You will also want to consider any claims you may have against your lender. The more leverage you have to work with, the better deal you are likely to secure. Having a lawyer representing you in the workout process will make sure that no stone is left unturned and show the lender that you are serious about negotiating a deal.

Contact a Libertyville Real Estate Attorney

If you have questions about distressed loans or loan workouts, you need the help of a skilled and experienced Lake County loan workout lawyer. Call Newland & Newland, L.L.P. at 847-549-0000 for a free phone consultation today. You may only have a small window of time to avoid the full negative consequences of a default.

Source:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2017&ChapterID=56&SeqStart=99900000&SeqEnd=103300000