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If you need a new bank to finance a takeout of your existing bank, it sounds to me like you should first find a lender who will finance the project. They can guide you as to how much they would be willing to finance....that should give you a starting point to negotiate with your existing bank.
Finding a new bank could be tricky, as most lenders are very leery of taking out a construction loan that is in process. Construction is complicated, and there are always problems, so asking a lender to come into the picture mid-way through the project will be a challenge. Your best bet is to find a way to finish the work (credit cards, home equity, friends, family etc)....your odds of finding financing will increase if you do that.
(Distressed Loan Advisors provides loan settlement and modification advice to small businesses, and can be reached at JasonTees.com)
Advice on Negotiating Discount, Welcome
If my bank asked me to make them an offer to discount the note, I would start with 50% of the note.
I would also contact my lawyer. Good luck
You just have start asking banks or other financing companies these questions. All have different policies - all are in different situations (e.g. the bank next to yours could be financially sound while yours is not).
Start very low with the discount - always easier to go up then down. 50% may be OK or it may not be enough. Think this way - it is your business and your life - be ruthless - they will be ruthless with you.
Other suggestions - you might think about a SBA lender - they may be more willing to look at your entire history - but, most focus only on how you are today - not tomorrow nor yesterday. If you have been generating some business assets - like accounts recievables, purchase orders or even credit card receipts - there are ways to factor these for needed financing - just keep in mind that these are not long term financing vehicles and should only be used until you find something better. Moreover, you could look into refinancing the commercial property - but, keep in mind that very few lender will allow cash out if you have equity in the property.
Or, if you have equipment - you could do a sale - lease back. You sell the equipment to the lender for cash (only a paper transaction) - then lease or buy on term the equipment back. Gives you cash in hand - but you will have a note just as if you took out a loan.
Lastly, does the franchisor have any programs to help you?
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My husband and I purchased a franchise and a commercial piece of real estate before the big melt down. We went through a remodeling project to ready the property for the new business. We were running short of funds to complete the construction part of the project and pay for all the necessary equipment. We requested additional funds from the bank carrying the construction funding...they could not do anything for us (we did not know at the time that they were under FDIC watch and could not make any loans). We exhausted our personal funds to complete the project and open the business. Since our bank cannot complete the loan, we are looking for new financing. The bank with the construction financing has offered to discount the loan. I have two questions...our business was operating at a loss when we first opened (first three months). We are turning some big corners and reduced the loss substantially in the second quarter. We do have a commercial piece of real estate but our credit has taken a nose dive because we have had to inject alot of our personal funds into the business. I do have my credit scores from three months ago and six months ago, and they are considered very good. Are there lenders out there that can look at the whole picture and help us with new financing? Second question...our bank told us to make them an offer because they are willing to discount the note. Where do we start with the discounting?