Rate & Term Commercial Refinancing:
Commercial Refinancing refers to the replacement of an existing older loan with a new loan having different terms but written on the present balance outstanding and having a new fixed or variable interest rate and/or perhaps a different term, meaning a longer or shorter amortization period.
Business owners generally voluntarily refinance their loans for 2 reasons — which may over lap:
· To change their interest rate from variable to fixed, or vice versa, and perhaps to take advantage lower market interest rates.
· To either lengthen the loan term to lower payments and thus improve cash flow, or shorten the loan term to work their way of debt faster.
In the above cases, the decision to refinance is solely the business owner's business decision, meaning it is voluntary on the part of the business owner and is part of his/her general business plan to maximize a perceived business goal.
Non-Voluntary Commercial Refinances:
Non-voluntary refinances are caused by the original commercial mortgage that has a balloon clause (sometimes called a "Call Feature", as in calling the note) requiring a refinance that makes the loan due in full, if not renewed by the present lender, or a new lender who will pay off the old loan.
The majority of commercial mortgages written over the past couple of decades have had a balloon feature that forces the borrower to refinance in 5, 7 or 10 years, so the lender can decide if the business remains strong and the borrower's type of business remains the business type the lender now wants in its loan portfolio.
Yesterday's, "No sweat", may become today's "Sorry, we no longer want your loan":
In what we used to call normal times, having to refinance, due to a balloon clause, was an expensive PITA, but sometimes it opened the door for a new mortgage with better terms. In addition, if the present lender decided not to renew a particular loan, in the "high flying era", there was always another lender waiting to compete for your business.
However in today's market conditions, having to refinance due to a balloon, or call feature, can quickly turn into a disaster, if your present lenders opts not to, or can't, renew your loan.
In our present financial credit crisis, the vast majority of local and regional lenders are NOT, or CAN NOT, LEND at all —– and they have a lot of balloon mortgages coming due in 2010 and 2011.
Since little, if any, of the so called "Stimulus Money" has found its way to Main Street lenders, many small and medium sized business are potentially going to find themselves facing FORECLOSURE due to lack of willing lenders, if their present mortgage balloons in the next 2 years.
Some Very Valuable Advice:
If you are facing a balloon, DO NOT wait until the last minute to begin the refinance process. Start looking immediately for a new loan to protect your business assets and livelihood that you have worked so hard for over the years.
There still a few lenders that desire your business and are ready, willing and able to write new loans for well qualified borrowers, —- and they work for us!
I see so many bear traps waiting in the bushes for small and medium sized business that I have made it my mission over the next couple of years to use my years of experience to protect, save and lead my small business clientele through the coming mine field.
If you have a balloon coming up, I suggest you to talk to me. It will not cost you a nickel or obligate you in any way. I will simply do my best to make sure you don't, through no fault of you own, become a casualty.
If you are already in a bind and have been threatened with foreclosure, please see the section called "Commercial Loan Modification" where you will learn how we maybe able to help.