States Are Forcing Business Owners Into Technical Commercial Loan Default, Winston Rowe And Associate
A technical default is the result of not meeting a condition of the loan, and has nothing to do with missing a scheduled loan payment.
By: Winston Rowe and Associates
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.
Lack of Cash Flow
Changing Type of Business
A Second Position Mortgage with Out A Subordination Agreement
Local Economic Factors
Rise in Crime
Not Raising Rents or Rents Below Market Rates
The Business Not Being Properly Capitalized
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