As increasing interest rates remain a hot topic in 2023, loan repricing and loan maturities are also gaining traction. If you have a commercial real estate loan that's set to mature or reprice soon, chances are you have a variety of questions. If so, you’ve come to the right place. As the premier Twin Cities lender, we believe knowledge is power, and we’re here to provide you with the information you need to help make informed decisions. Let’s dive into those frequently asked questions that borrowers, just like you, are eager to unravel.

What are the typical factors and considerations a banker looks at when my loan is maturing?

For commercial real estate loans, banks embark on a thorough re-evaluation of the property’s metrics. They confirm whether the property’s cash flow, debt service coverage, loan to value, and other factors still comply with today’s underwriting requirements. Bankers also carefully evaluate factors such as your personal financial strength, liquidity, and the support you may provide as guarantor or sponsor. Additionally, they consider your deposit balances with the bank (the higher, the better) and any movement of additional deposit balances from other sources as part of their evaluation of the relationship. Your payment history with the lender is also taken into consideration, underscoring the importance of having a strong banking relationship.

What should I do if I have a loan that will reprice in the coming year, and the property won't service the debt at the new rate?

Be proactive. Take the initiative by meeting with your banker and discussing potential solutions with your equity partners. Your banker is there to hear your concerns and help you navigate this change. A dedicated banker should be eager to provide responsive support and discuss solutions.

What if making my loan payment becomes a concern?

In such scenarios, banks generally expect clients to develop a solid plan to overcome the financial hurdle. This might involve strategizing on ways to improve property performance (increasing income, reducing expenses, improving occupancy), reducing your debt level through a principal reduction, enlisting the support of a guarantor, or exploring other credit-enhancing options. Rest assured, knowing there are ways to tackle this challenge and find a solution that works for you if you take the initiative. Thus, it is important to be proactive and address your concerns early on with your lender.

At Bridgewater Bank, we recognize that our current economic environment is quickly evolving. We're committed to helping you navigate these financial waters with confidence and providing you with the tools you need to succeed. Now, more than ever, having the right banking partner. One who is responsive to your questions and dedicated to supporting you every step of the way is exceptionally significant.