Many small business owners are about to come face to face with a big problem: balloon payments are coming due. Banks usually re-evaluate commercial loans every five to ten years, and they can either decide to renew the commercial loans or ask the borrowers to pay them off which is the balloon payment. Now, commercial lenders aren’t as likely to take risks on commercial loans, and it’s tough for borrowers to look credit worthy after being hit hard by years of recession. Many small businesses will now face the struggle of finding someone to cover the balloon payment on their commercial loan or the struggle of foreclosure.

According to an article published in The Wall Street Journal, “Some $276.2 billion of nonresidential commercial-property loans are expected to come due in 2013,” which is more than any year prior. A lot of these commercial loans were made prior to the financial collapse in 2008 when businesses were still bringing in money and could depend on the money to repay the balloon payment on their loan. A number of these commercial loans also came due in the midst of the recession, and many banks were willing to give businesses extensions.

Now balloon payments on these loans are coming due, extensions are ending, and banks are more willing to foreclose on the commercial property if a borrower can’t make the balloon payment. The number of foreclosures will depend on whether the economy continues to improve. “If it does, banks will steadily agree to refinance loans and offset the number of foreclosures that would have otherwise transpired,” according to the article.

If you are one of the many small business owners who could be affected by balloon payments coming due, and are having trouble getting the bank to renew your commercial loan, consider refinancing with Apex. We specialize in small commercial property loans and may be able to help you with your financing needs.

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