Although the COVID-19 pandemic will continue to impact the economy, numerous commercial borrowers have begun contacting their lenders about either actual or anticipated defaults on their loans, seeking payment deferrals, interest-only periods on amortizing loans, temporary or permanent modification of lending formulas and covenants, and waivers of defaults.
Loan modification and forbearance agreements are two methods most commonly used by lenders to provide breathing room to a defaulting (or soon-to-be defaulting) borrower. Lenders and borrowers need to have a comprehensive understanding of the best practices in the negotiation and structuring of loan modification and forbearance agreements.