Five Step Borrower Plan


By: Cindy Hopkins

In today’s still-dodgy economic environment, it is more necessary
than ever for commercial real estate borrowers to take some key steps
before approaching loan restructuring negotiations. Neglecting this
critical prep work can reduce your chances of success even before you
reach the negotiating table. No matter which side of the table you’re
on – preparation is the key.

For borrowers, facing a potential loan restructure is tough but not
impossible. These steps help borrowers widen their focus to see their
specific situation in context of the big picture.

1. Be totally objective regarding your restructuring needs. This is
not the time to just think you know where you stand and hope for the
best. Take off the rose-colored glasses and face the reality of your
situation. Lenders are dealing with many, many borrowers in similar
straits, so there is no need to be shy about putting the facts on the

2. Take action early. Don’t assume that your situation will improve.
Many borrowers who delay find that their liquidity has become so
constrained that it limits their ability to complete a successful
restructure. At best, restructures take 60 to 90 days to complete;
they often take much longer.

3. Think like a lender. As you develop your plan of action, consider
how you can approach the negotiation in a way that benefits the
lender. Remember, lenders have more options than borrowers do, such as
demanding repayment, foreclosure, involuntary bankruptcy, and suing on
guarantees in order to get their money back. If you can’t show your
lender how your proposed restructure is in its best interest, the
proposal very likely will be rejected.

4. Take into account all of the lender’s issues. For lenders, a loan
restructure is not a pure business solution. They also may be dealing
with regulatory, accounting, and loan loss reserve issues, as well as
other factors beyond the loan and its security. It is strategically
wise for borrowers to take these lender issues into account as they
prepare for negotiations. Otherwise, it will be harder to put together
a deal that makes sense for both sides.

5. Compare the potential loan restructure to the outcome of filing a
Chapter 11 bankruptcy. This is the benchmark against which you should
measure all of your preparatory work. It doesn’t make sense to pursue
a loan restructure if filing a Chapter 11 will leave you better off in
the long run. Your lender also knows this and that could affect the
success of your negotiation. So if you can qualify for a Chapter 11,
don’t rule it out as a possibility.


Cindy Hopkins, CCIM
Associate Broker
KW Commercial
2303 N Ed Carey Drive
Harlingen, Texas 78550
956.778.3255 (m)