Small Commercial Business Financing Reality Checks
Few business owners theses day have traditional bank funding options available to meet commercial business financing needs. Banks have been the traditional source of small commercial business financing loans for several decades, but this role seems to be growing to a close. As a result, it has become essential for borrowers to both evaluate their commercial business financing needs and find new sources for commercial business financing and working capital loans. This report provides a series of brief explanations about some of the most critical commercial business financing and lending issues likely to be confronted by small businesses.
The unfortunate reality that bankers are just not what they used to be for most small commercial business financing situations is described by "banks are not the solution, they are the problem". Hardly a week passes without negative reports about the poor financial health of banks. In one recent report, it was noted that there are now more problem banks (which are banks judged by the Federal Deposit Insurance Corporation as being more likely to fail) then anytime in the past eighteen years. The number of these troubled banks has grown from 305 in early 2009 to a total of 775 at the end of March 2010. It is likely for commercial business financing borrowers to have even more trouble getting water from a well that is running dry with financial data like this.
An essential perspective for small commercial business owners to have in the problematic loan climate displayed by most commercial business financing lenders serving small businesses is "it is necessary to have realistic expectations". Gone are the days of buying a business with little or no down payment. The relative ease of getting working capital has been replaced by a less predictable borrowing climate for any form of working capital that is not secured by assets, and it is important to expect this lending situation. A much longer list of underwriting requirements that can realistically make refinancing attempts either difficult or impossible has produced a visible influence on efforts to refinance commercial mortgage loans.
Some candid advice for small business owners desperately seeking new commercial business financing is "avoid online applications for commercial business financing". This suggestion is a specific attempt to emphasize that it is not prudent to provide confidential business finance information before it is determined that commercial business financing is feasible for a particular financial need. Such automated application processes are obviously a convenience for the lender, but this does not translate to a sufficient reason for exposing private business data without knowing more about the small business loan criteria that will be used by the commercial lender receiving the information. Having an individualized and lengthy discussion with a small commercial business financing expert to determine what the practical commercial loan options are in advance is an effective substitute for this questionable practice.
A reflection of the realistic possibility that something will go wrong with a current small commercial business financing option is "small business owners should have a Plan B", and to prepare for this business owners should do some advance planning. For their management operations, contingency planning has always been a worthwhile task for small businesses. To help soften the blow if problems develop with existing business finance services, it is strongly recommended that a variation of contingency planning also be adopted. Businesses will frequently uncover financial improvements that they can make immediately by engaging in this forward-looking approach to working capital management and commercial loans.
It should be noted that this brief evaluation covers only a small part of the total business lending picture likely to be experienced by small commercial business owners. In other words, as bleak as this accounting might be, it is only the tip of the iceberg when it comes to commercial financing problems that exist for small businesses today. This discussion is provided as one tool for small commercial business owners to use in their efforts to become more successful in securing reliable commercial loans and working capital financing. Some of the most important factors currently impacting small commercial business financing were highlighted in this article. Receive a free, initial, commercial business financing feasibility review from Westshore Mortgage & Investments Co., Inc.