What Do You Do When Your Loan Matures and Your Bank Will Not Renew It?

We field distressed commercial loan borrower calls almost daily here at CommercialLendingX.com. It usually starts with something like “I have been with my existing bank for fifteen years. I have never missed a payment and have always been a great customer. My loan is set to mature next month and just the other day I got a letter from my bank saying they are not going to renew my loan. Why are they doing this? What do I do?” Most commercial loan customers take that letter very personally, and they honestly do not know what to do.

When a borrower receives that letter, the first thing they need to do is understand that their relationship with their existing lender is done. Although it is hard not to, the customer cannot take it personally. Often times lenders change directions on what they are doing and willing to lend on, and although your loan and relationship may be good, someone in Bank management has determined to make a policy change without regard to the relationships the Bank has with its existing customers. The best thing a borrower can do at that point is focus on moving on.

Certainly it helps to find out if there is a reason why the Bank no longer wants to do business with you. If there is a concern over collateral value, business cash-flow, and / or borrower and guarantor liquidity, sometimes these are things that can be addressed with your existing lender or may need to be addressed before you can approach another commercial lender. But if the reasons are policy driven, there is absolutely nothing the borrower can do.

Just remember, there is always hope. Other lenders are actively pursuing good loan requests, and there are many traditional and private lenders (with conforming rates), that likely want to take a look at your commercial loan request. As the Borrower you need to focus on getting your financial statements together and a package together to present to other commercial lenders. In most cases your existing lender will offer you short-term renewals to give you time to move the commercial loan out of the bank, although they often do so with higher rates and fees to encourage you to do so quickly. But lenders will typically only work with a borrower if that borrower is putting forth legitimate efforts to move the relationship from the Bank themselves.

So to review, the keys if you get that awful letter from your lender are: 1) try not to panic and understand you likely did nothing wrong and understand you have other financing options; 2) find out why the Bank does not want to renew your loan and try to address those concern(s) for either your existing bank or a new commercial lender if you can; 3) get your financials and loan request together to approach other commercial lenders with; 4) start contacting other commercial lenders; and 5) work with your existing bank on a short-term renewal to get the time necessary to move your commercial loan. Your existing lender does not want to put you into default. They just want the loan moved. They will work with you to make it happen. And if you need help getting it done, the experts here at CommercialLendingX.com are glad to help you out.