Whilst we hear plenty in the news about residential property market woes, we hear very little of the suffering going on in the commercial market and the commonplace practice of banks calling in commercial loans. I read a recent article about two investors who had taken out a commercial loan to fund a hotel development.The bank called in the loan, leaving the developers high and dry with no alternative except repossession.
The banking crisis has meant that all banks need to get these large loans off their books and physical cash back in the vaults- at any cost.
RBS & Nat West Are Worst Offenders For Calling In Loans
Two of the worst offenders for calling in commercial and landlords loans are RBS and NatWest. They are calling in loans with no warning and forcing companies into liquidation or repossessing their properties, only to sell them at massive loss at auction. I heard another story of a chap who owns a chain of fish and chip shops and missed one payment off the loan-which was subsequently paid back the following month. However, that one missed payment meant the bank decided to start repossession proceedings. The business was in profit at the time!
Another guy we knew had a development of a small block of flats which ran into difficulties when the market changed. His aim was to pay the finance back by selling. Market conditions meant he had difficulty selling, so he did the only sensible thing and decided to rent the properties. This enabled him to keep the development, make a healthy profit and stay in business. However, the bank decided this wasn’t good enough and started repossession proceedings. They wanted the loan back, regardless of the cost/loss to him.
Commercial bank loan contracts often have clauses regarding timescale and how the loan should be paid back. It seems that many banks are using any excuse just to get these large loans, often running into millions, off their books. Family businesses are being lost, causing much heartache and pain by forcing a fire sale on profitable businesses. Businesses which are then lost to the community forever.
Another tactic used by banks is to call in the business owner and tell them that their existing loan will be “restructured.” Often this means forcing the business owner onto a new loan with higher interest charges and a fee for arranging the enforced change to boot! The alternative offered being repossession.
What business owners don’t realise is that many of these heavy handed practices are illegal and can be challenged- at a cost. You may not be aware, but on commercial loans when banks want to call in the loan the are required to keep a contingency fund to the same value of the loan they want to call in until the matter is settled. It’s this contingency which allows us to negotiate settlements.
Write Down Your Commercial Loan & Refinance It
If you are in a situation similar to the above, we can help stop the commercial loan being called in. If you are a landlord with portfolio issues, we can help there too. Our financial expert negotiates directly with the bank chairman or upper level management to get the loan written down by up to 50% of it’s original value. This loan can then be refinanced via newer banks who do have money to lend, or we can find other exit strategies. This system is only for values over £1 million.
This is a win/ win for all concerned. The original bank is paid off, and the business person can carry on trading with a new loan in place. The new loan often has better terms because the loan value is now less to pay off.
If your commercial loan ( asset value of £1 million or over ) is being called in by the banks, it’s very likely we can help you. We could even help some Landlords with large BTL portfolios in similar situations, where they are commercially financed. Get in touch and we will pass you on to our experts for a confidential chat. Have a look at our Commercial Loan Restructures page for more in depth details, or watch our short video here:
Lastly, if you are looking for any kind of property finance from those who do want to lend, check out our finance page.
UPDATE 2013: please read our other article- Warning! Why Banks,Balances & Basel III Add Up to repossessions
**UPDATE NOVEMBER 25th 2013**
In the news today RBS has been referred to the financial regulator the FCA & PRA for seizing assets from businesses to benefit its own property empire. A report by Lawrence Tomlinson claims that RBS put viable businesses into default ( and subsequently repossession LPA receivers) in order to make more profit for themselves.
Don’t let the government con you into believing this is all in the past, it is not. It still goes on even with the new management at RBS and other banks. We can help get your business back on track.