It is becoming increasingly common for banks to not renew business loans even where the business has always been current on loan payments. Strict banking regulations are driving these lending decisions. So, what is a business owner to do?
1) Several months before your loan matures, you should begin talking to your lender about the terms of renewal to see if the lender is actually going to renew and on what terms.
2) In anticipation of this meeting, you should gather all up to date financials for your company including tax returns, balance sheet, profit and loss statements, and any appraisals of the collateral.
3) If it becomes apparent that your lender won’t renew, then you will want to look into refinancing options and the possibility that the lender might take a discounted payoff of the loan.
4) If the loan matures and you are not able to find refinancing or obtain a discounted payoff, you can request that the bank enter into a forbearance agreement. Such agreements are typically anywhere from 60 days to a year in length. During this forbearance period, you have some additional time to still explore refinancing or a potential sale of the collateral.
5) If the forbearance period has lapsed and the bank will not grant you another forbearance period, you could file a Chapter 11 reorganization bankruptcy to force a restructure of loan with the bank as well as restructure debts with other creditors.