The financial impacts of the COVID-19 pandemic have been hard on everyone, especially small business owners. In the state of New York, mandatory shutdowns of non-essential businesses went into effect in mid-March. Though phased reopening of many industries began in June, many small businesses have not recovered from the economic blow – and some companies have permanently closed.
Facing mounting costs and decreased income, many small business owners wonder how they will avoid foreclosure and financially survive the ongoing pandemic. One option is to modify or restructure an existing Small Business Administration (SBA) loan to make it more affordable with a lower payment, longer term, or better interest rate.
Can You Get a Loan Modification?
According to the SBA, types of modifications available with guaranteed loans include temporary or permanent reduction of interest; deferring payments and/or principal only; extending the maturity date to reduce payments; temporarily reducing payments; and re-amortizing loan payments. In many cases, payment modifications can be made without SBA approval, but the process must be documented. Other types of modifications require written SBA approval.
To qualify for an SBA loan modification, a business must demonstrate that it is not overly financially distressed but rather experiencing systemic issues that hinder the payment of the debt. This may include reduced revenues, increased competition, or other market forces that adversely impact financial performance – such as the coronavirus crisis.
How to Defend Yourself Against Closure
If you're facing foreclosure, it might be possible to delay or prevent this from happening. In each of these instances, you'll want the opinion and guidance of a skilled bankruptcy attorney or financial advisor. Possibilities include:
- Refinancing your loan through a different lender
- Finding other sources of financing (such as family, friends, or other investors)
- Personally guaranteeing the loan
- Filing a restraining order against the lender
- Declaring bankruptcy
Given the extreme circumstances of the pandemic, many lenders are more inclined to work with struggling small business owners – but if you need help defending your residential or commercial property from foreclosure, it can help to have an experienced attorney on your side. Contact us today for a consultation.