Your building may be the center of your business operations. For those who require specialized locations, like restaurants and factories, it can be very difficult to pick up shop and move to a new location.
Unfortunately, if your business gets into financial trouble and can’t pay the loans secured by the property, that’s exactly the situation you may face if the bank decides to foreclose.
However, most banks don’t really want to take a building. It’s inconvenient to deal with. Buildings can be liabilities while they are owned by a bank, so banks eventually have to arrange their sale to try to recoup their losses.
All of that takes more money, and you can’t deposit a building into a bank’s coffers. That means that banks are usually somewhat motivated to try to work out other arrangements with business owners who have hit a seemingly-temporary rough patch.
These are some financial options you can explore:
- File for bankruptcy protection. Chapter 11 can at least delay foreclosure processes temporarily and allow you to restructure your debt. That may be enough for you to get the arrears caught up and keep your building.
- Ask the bank to refinance the loan. If you’ve had a good relationship and you aren’t in arrears yet but can see it coming, the bank may refinance your loan and give you a smaller payment.
- Put your own money or property into the deal. If you’ve kept your personal assets and money out of the business thus far, it might be time to take a risk if you really believe the slump will pass.
- Get investors (or borrow). You could open your business to investors or borrow funds from friends and relatives if they’re in a position to help you.
As you explore your options, keep in mind that banks respond better to business owners who are proactive. Don’t allow your loan to go into arrears for months before you contact the bank to try to work out a deal.
Be prepared to show how you got to your current situation and why you think it is only temporary. Those things will encourage a bank to delay foreclosing on a business property and try to work thinks out.
Source: thebalance.com, “Foreclosures on Business Property,” Jean Murray, accessed March 09, 2018