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What is loan restructuring?
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4th Dec 2009 by Tom Lindmark
All loans have certain things in common. Generally these include an interest rate and a maturity date at which time the loan must be repaid. When a borrower finds itself in trouble financially, it normally approaches its lenders and proposes a loan restructuring. This usually involves a reduction of the interest rate and an extension of the maturity date. It might also involve a forgiveness of a certain portion of the amount owed. The goal of a loan restructuring is to keep a business viable and out of bankruptcy. The decision on the part of a lender as to whether or not to restructure a loan boils down to whether it thinks it can recover more of its loan through bankruptcy or through a restructuring.
All loans have certain things in common. Generally these include an interest rate and a maturity date at which time the loan must be repaid. When a borrower finds itself in trouble financially, it normally approaches its lenders and proposes a loan restructuring. This usually involves a reduction of the interest rate and an extension of the maturity date. It might also involve a forgiveness of a certain portion of the amount owed. The goal of a loan restructuring is to keep a business viable and out of bankruptcy. The decision on the part of a lender as to whether or not to restructure a loan boils down to whether it thinks it can recover more of its loan through bankruptcy or through a restructuring.
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17th Nov 2009 In Finance
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Subjects: loan restructuring,