Owning a business comes with numerous challenges, and a big one is financial. If an owner has a mortgage out on the business property and cannot keep up with the payments, foreclosure could be in the future. When facing a foreclosure, it is important to be realistic and make sound decisions.
A business foreclosure is similar to the foreclosure of a home, and the Michigan State Housing Development Authority outlines the steps of the foreclosure process. Even paying the mortgage a day or two late can start a spiraling process. Late charges begin to add up, and during this first month the lender will make contact with the borrower to let him or her know what the options are.
On day 45, if the owner has not made a payment, the lender will notify the owner in writing that the account is delinquent and will provide loss mitigation options. On day 121 of no payment, there is a scheduling of a foreclosure sale date, and the county newspaper receives debt details for four weeks in a row. If the borrower takes no action by the sale date, the selling process commences.
The good news for business owners is that Michigan State University discusses alternatives to foreclosure if the owner wants to keep the property and continue to make payments of some kind. The key is to communicate with the lender as soon as there is financial difficulty. The lender may be willing to make modifications to the loan so it is more affordable.
If the financial problems are just a temporary thing, the owner may also be able to defer payments for a time being and then make higher payments to catch up. The business owner should ask the lender what options there are and only agree to a plan if he or she can actually make the payments regularly.