When the Bank Demands Payment in Full: 3 Options for Borrowers with Matured Business Loans (By David Soble)
There are 3 realistic options that a business owner should consider when their bank demands payment of the loan in full:
1. Pay off the loan. In today's restrictive banking climate refinancing sounds much easier than it really is. Banks infrequently rewrite their own commercial loans upon maturity. This is because the financial position of many small businesses has diminished since 2007. Also lending guidelines were more' flexible' then, with commercial properties reportedly having higher values.
2. Negotiated Exit. Be assured that if a loan has matured and the borrower is not prepared to pay if off, the bank will begin a lawsuit. Defending a law suit can be expensive, but in most cases it will only delay the inevitable. Absent real legal defenses for bank misconduct or the mishandling of a loan, the best approach for a business owner is to negotiate a realistic "exit" from the bank with the assistance of experienced counsel. There are a numerous variables for consideration when negotiating a forbearance or settlement agreement, so unless a business owner is familiar with bank work out or special asset protocol, retain an experienced attorney.
3. Reorganization. Chapter 11 reorganization can be expensive, but it is an excellent remedy for business owners... A Chapter 11 bankruptcy should be a final option,