|
|
|
Commercial Mortgage Debt |
Commercial mortgage is a loan provided against the commercial property
as collateral, more often at the fixed rates with discussable premiums,
down payment and other items. In spite of the fact that commercial
mortgage is quite a profitable bargain to the lenders, the commercial
mortgage debt is quite a risky deal that could result into default and
bankruptcy.
Commercial mortgage debt could be the result of some reasons. The most
regular ones are one-sided (for instance, the partner's financial
collapse), the law suits, additional unforeseen expenses, or the
sequence of the circumstances. Whatever the reason is, cash flow is
something any business lacks before facing the commercial mortgage
debt. This problem is referred as the "debt service default".
Commercial mortgage debt can be modified (see the "commercial mortgage
modification" key words) on condition that the situation is carefully
analyzed together with the commercial mortgage lenders. The commercial
mortgage lenders will consider the cause of lack of cash flow, what the
commercial ratio will be like after modification, whether a business
owner will be able to cover expenses with the new receipt of funds,
etc.
Debt services coverage is the ratio that is worthy being considered by
a business owner since the commercial mortgage lenders take the debt
services ratio as the basis for another loan, i.e. whether the property
value is able to cover the loan modification. The debt services
coverage ratio is calculated by the formula: net operating income
divided by annual debt service (see debt services
expert).
A number less than unity means that a businessman should pay the
difference from own pocket. A number more than unity provides an
opportunity to obtain the loan at no problems. |
|
|
|
|
|
|