Are Commercial Banks Bankrupting Small Businesses

 Small Business Owner Alert!  Your commercial bank could be putting you out of business unless you are prepared for the worst case scenario; your note is due and payable now! What are you going to do if this happen to you?

 

By Manny Caballero

Real Estate Commercial Group

Ulysses Sanchez, senior vice president of Real Estate Commercial Group, said “it’s clear that commercial lenders may have been holding off on foreclosing and might be working with business owners with a commercial loan modification but lately we are seeing business owners who are current with their commercial mortgage loan, and some even have lots of equity still in today’s real estate market are having their mortgage notes called due”. Why?

Federal banking regulators may be encouraging loan extensions and a forget policy for notes that are ballooning  but if you have personal credit issues for any reason, it could be reason enough for the bank to call your mortgage loan due and payable upon demand.   Some commercial banks recently are calling their notes due and payable even though you may be current and cash flowing. 

A scenario of a commercial bank calling the note due and payable is a Jane Doe of Illinois, who has inherited and owned her three commercial building for over 70 years.  Jane Doe had some medial issues but for some reason her medical insurance failed to pay her medical bills and her personal credit score was adversely affected.  Now her bank is calling her mortgage due and payable. Why, if she is never been late, why, if she has so much equity even in today’s real estate climate, why if she is cash flowing great and rely on here investments for part of her income?  The answer:  The bank can call the note for “any adverse change” in her financial profile even if she has never been late.

How about John Doe in Virginia who owns an office condo and as part of his loan program he provides quarterly financials to his bank.  John Doe’s recent quarterly report is showing decline in his sales which is connected to our current US economy.  John Doe is current with his mortgage and never been late and in fact, the loan payment was automatically drawn from his account on a monthly basis.  Now his commercial bank is calling his note due and payable because his financials are showing decline in sales.  Why?  The bank call accelerate the note if “there is any adverse financial change” to his business.

Arizona has about $1.3 trillion dollars in foreclosure right now and this is does not account for SBA 7a loans.  “Banks could be getting pressure from regulators to get bad loans off their books” Mr. Sanchez reports but in the reality if a loan is current and performing why are commercial banks creating problems?

With a tight commercial lending market it will be difficult for the John Doe’s and Jane Doe’s in America to get a new loan.  Some will close their business, unemployment will continue to increase, and with a few getting some will be able to get an interim loan which could be delaying the inevitable.

“Small business owners need to get prepared with a plan B, an exit strategy “says Ulysses of Real Estate Commercial Group, who specializes in SBA loans, commercial loans and commercial loan modifications.  If Arizona has $1.3 trillion in foreclosure, that could be good for investors who are waiting to start buying but for the small business owner, the backbone of America, it could turn a recession into a depression unless we work together to create the solutions that work.