States Are Forcing Business Owners Into Technical Commercial Loan Default, Winston Rowe And Associate

BLOOMFIELD HILLS, Mich. - May 25, 2020 - PRLog -- States that are not allowing businesses to open are causing commercial mortgages and business loans to go into technical default even though they are not missing payments.

Most commercial and business loan documentation contains one or more financial covenants that will cause you to become in technical default including cash flow covenants, such as a debt service coverage ratio, a fixed charge coverage ratio, or an interest coverage ratio, leverage ratios comparing total debt to cash flow and liquidity covenants.

With continued shut downs of state and local economies many businesses will not survive.

What is technical default of a commercial mortgage?

A technical default will result in payment of the commercial mortgage or business loan to be made in full. If the business owner can not pay in full, the business and its assets are liquidated.

Some examples of commercial mortgage technical default.

Property Value

Lack of Cash Flow

Changing Type of Business

A Second Position Mortgage with Out A Subordination Agreement

Local Economic Factors

Force Majeure

Rise in Crime

Environmental Factors

Not Raising Rents or Rents Below Market Rates

The Business Not Being Properly Capitalized

Fraud

Since business and life in general is about managing risk the economy should be opened sooner rather than later.

Winston Rowe and Associates prepared this article they are a national consulting firm. You can contact them at https://www.winstonrowe.com