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It is Time to Look at Your Loan Documents

There is no question that the last 3 or 4 months have transformed the business environment throughout the country. The coronavirus pandemic has caused almost every company to change the way they do business. Some businesses have been completely shut down for months while others have had to transition to conducting business from employee homes using email and video conferencing.

While some businesses have been able to keep their heads above water, the impact on others cannot be understated. Many small businesses have simply been unable to deliver their products or services the way they had been doing just a few months ago. The financial harm caused by the pandemic has been nothing short of catastrophic.

Understanding Loan Covenants

Prior to the start of the pandemic, many small businesses were operating with at least some level of debt. Many of these loans had been negotiated during good times and include financial loan covenants that have been seriously impacted by the change in the business environment. For example, some loans have a loan covenant that requires that the borrower maintain certain debt-to-equity ratios. Other loan covenants require that the borrower maintain a certain minimum cash flow. It is easy to understand how the sudden business slowdown would impact those covenants.

With the business slowdown filtering to the bottom line, many businesses may now be in a position of default with respect to their commercial loans. Some banks contacted their lending customers when the pandemic began and offered to extend the loan terms or wave certain loan covenants. Other banks or lending institutions may not have been that proactive. In either case, it is imperative that business customers examine their loan documents to determine if they have any loan covenants which might be in default because of the pandemic.

Request a Consultation Today

The attorneys at Penzien & McBride PLLC have extensive experience with loan covenants and commercial loan documents. We are always ready to consult with any business customers that might be in the process of either renegotiating or working out a default situation in their own arrangements. If your business is in a position where you may need to renegotiate your loans, feel free to contact us today.

To schedule your case consultation with one of our dedicated business law attorneys, please call (586) 690-4400. We are here to listen to your concerns and can provide you with the efficient counsel you need to protect your best interests.