States that are not allowing businesses to open are causing commercial mortgages and business loans to go into technical default even though they are not missing payments.
Most commercial and business loan documentation contains one or more financial covenants that will cause you to become in technical default including cash flow covenants, such as a debt service coverage ratio, a fixed charge coverage ratio, or an interest coverage ratio, leverage ratios comparing total debt to cash flow and liquidity covenants.
With continued shut downs of state and local economies many businesses will not survive.
What is technical default of a commercial mortgage?
A technical default will result in payment of the commercial mortgage or business loan to be made in full. If the business owner can not pay in full, the business and its assets are liquidated.
Some examples of commercial mortgage technical default.
Property Value
Lack of Cash Flow
Changing Type of Business
A Second Position Mortgage with Out A Subordination Agreement
Local Economic Factors
Force Majeure
Rise in Crime
Environmental Factors
Not Raising Rents or Rents Below Market Rates
The Business Not Being Properly Capitalized
Since business and life in general is about managing risk the economy should be opened sooner rather than later.
Winston Rowe & Associates 