Explain a changed plan and support a credible repayment path.
A changed business plan needs a revised repayment explanation, not merely a new narrative attached to the original loan request. Reconcile what was planned, what actually occurred, why the change happened and what evidence supports the new exit. Preserve the original assumptions so the lender can see which risks were resolved and which have moved elsewhere.
The 2023 interagency CRE workout statement evaluates current repayment prospects and support resources. It does not require a lender to accept a revised strategy. The plan-change register below is an original hypothetical financing workflow, not a recommendation for a particular property.
Reconcile the operating plan before resizing debt
Assume the original plan was to renovate 40 units, achieve $600,000 of accepted annual cash flow and refinance a $4.5 million bridge loan after 24 months. At month 18, only 25 units are renovated. The owner decides to stop further work, retain the remaining units in their current condition and refinance on a lower stabilized income assumption of $480,000.
The change may be rational, but the original $600,000 projection cannot remain in the loan sizing. At hypothetical 1.25 DSCR and an 8% annual debt constant, original capacity was $6 million and revised capacity is $4.8 million. At 2% refinancing costs, revised net proceeds are $4.704 million, leaving $204,000 above the $4.5 million payoff before other uses.
If $250,000 of committed invoices and closeout work remain payable, the apparent excess becomes a $46,000 funding gap. Stopping future discretionary work does not erase obligations already incurred.
Build an original-to-revised evidence register
| Item | Original plan | Revised position | Evidence needed |
|---|---|---|---|
| Renovation scope | 40 units | 25 completed; 15 retained as is | Completed scope, invoices and remaining contracts |
| Income | $600,000 projection | $480,000 accepted-case assumption | Current leases, collections and expenses |
| Remaining cost | Original budget | $250,000 committed/closeout | Contract and invoice reconciliation |
| Exit date | Month 24 | Proposed month 22 | Lender and closing dependency schedule |
| Sponsor support | Original cash allocation | Updated unrestricted cash | Current balances and competing commitments |
Do not label the revised income “stabilized” simply because work has stopped. The lender needs evidence that the operating result is supportable under the new scope and that unresolved work does not impair occupancy or collections.
Distinguish a strategy change from a scope omission
Explain why the original plan changed using dated facts: actual costs, tenant response, leasing results, permitting issues or capital availability. Avoid attributing every miss to “the market” without evidence. A specific explanation permits the lender to test whether the revised assumptions address the cause.
If the revised plan excludes work necessary for legal use, safety, insurance or an existing tenant obligation, that is not merely optional scope reduction. Obtain the appropriate professional and contractual review. A smaller budget cannot make an unresolved requirement disappear.
Likewise, a move from sale to refinance changes the evidence needed. A sale valuation and projected marketing period do not establish a lender’s accepted cash flow, proceeds or conditions. Build the new repayment path independently.
Reconcile spending and remaining cash
Suppose the original renovation budget was $1.2 million. Paid costs are $800,000, the remaining committed amount is $250,000 and canceled uncommitted work is $150,000. The budget reconciles: $800,000 + $250,000 + $150,000 = $1.2 million.
The $150,000 canceled scope is a reduction in future spending, not cash newly received. If the original funding was never advanced, canceling it may simply reduce future draws. If cash was already held in a restricted reserve, its release or debt application depends on the documents. Record the actual disposition.
Do not count the same $250,000 obligation in both the payoff and separate closeout uses. Obtain a complete payoff and invoice schedule to identify which amounts are included where.
Show the revised downside and decision
If accepted cash flow is only $450,000, modeled gross capacity falls to $4.5 million and net proceeds to $4.41 million. Paying the $4.5 million loan plus $250,000 of committed work then requires $340,000 of additional cash. This sensitivity makes the importance of the $480,000 assumption concrete.
Identify whether the sponsor can fund the gap, whether another structure is actually available or whether the timing must change. A proposed extension or modification requires agreement; the revised business plan does not amend the current loan by itself.
Submit a version the lender can test
Provide the original plan, actual results, change decision, revised scope, supported operating case, remaining-cost schedule and updated sources and uses. Flag departures from prior representations or conditions for the appropriate review rather than hiding them in a new spreadsheet.
The finished memo should explain how the changed plan repays the loan and funds every continuing obligation. Its credibility comes from reconciling the transition, including unfavorable facts, rather than presenting the revised outcome as though it had always been the plan.
Sources and evidence
- Federal Reserve — Prudent CRE Loan Accommodations and WorkoutsSection IV Long-Term Loan Workout Arrangements; A Supervisory Assessment of Repayment Ability of Commercial Borrowers; B Supervisory Assessment of Guarantees and Sponsorships · Checked 2026-10-21 · Supervisory analysis of accommodations and workouts; examples and supervisory classifications are not borrower rights or guaranteed loan outcomes.
Source dates and applicability matter. Report an error or a changed source.