Financial Strategies

Commercial financing has changed dramatically during the past few months. The net result has been a reduction in commercial lenders as well as stricter standards for acquiring commercial loans and commercial mortgages. Unfortunately there has also been no shortage of misinformation about the availability of commercial funding, so an important change issue is to realize that for commercial lending there are both apparent changes and real changes.

As is often the case with financial changes, it remains to be seen how many will be temporary or permanent. But from a practical perspective, commercial borrowers are left with no choice but to adapt to the changing commercial finance environment. Regardless of how long the changes might be kept in place, small business owners must be prepared to operate within a more complicated climate for commercial real estate loans and business financing.

Perhaps the most dramatic change has been a significant reduction in business lending activity overall. This has been due to several events occurring almost simultaneously. Several major commercial lenders have gone out of business altogether. Many banks have stopped business finance lending while continuing consumer lending. Numerous business lenders have enacted stricter standards for the commercial financing transactions they are still willing to consider.

What should commercial borrowers do about this? A primary option that business owners should explore involves looking beyond their local market area for help with commercial real estate financing and other commercial loans. To accomplish this, it should be helpful to contact a working capital financing expert operating throughout the United States.

In addition to fewer business lenders to choose from, there are two other significant changes which must be anticipated by small business owners before seeking new business financing. First, most lenders have cancelled or are about to eliminate unsecured lines of credit for many businesses. Second, commercial lenders are increasingly demanding more collateral for virtually all commercial finance funding.

One effective commercial financing strategy for overcoming the combined obstacles of fewer lenders, more collateral and fewer unsecured credit lines is to consider a business cash advance program based on future credit card processing activity. This is proving to be one of the few sources of commercial funding that has not been adversely impacted by recent events. To learn more, it will be advisable to discuss the potential with a small business financing expert who can provide advice about business cash advances as well as other business finance solutions.

Another key change issue for commercial mortgage loans and working capital loans is simply the likelihood that more changes will be forthcoming in the near future. It is increasingly obvious that many banks will continue to modify their business lending programs in response to changing conditions as they occur.

To adequately prepare for future commercial finance changes that might (or might not) occur is a daunting task for a business owner. A commercial financing expert familiar with Plan B contingency financing for commercial loans will prove to be a valuable resource for any borrower wanting to seriously deal with both current and future changes impacting the financial health of their business.

When faced with business finance funding decisions, it is essential for business owners to determine their practical and effective alternatives. In the face of recent volatile conditions impacting financial markets, this will not be an easy task. For example, there has been much misinformation and confusion about the true availability of commercial financing throughout the United States. Getting more accurate information about what is realistically possible can be one of the most difficult challenges for commercial borrowers.

Even for business owners who are satisfied with their current commercial finance funding arrangements, it is advisable to explore business financing options that might be necessary if economic conditions change further. The use of Plan B contingency financing is an important tool to assist commercial borrowers in this process.

There are a number of harsh realities which must be confronted by all commercial borrowers when assessing their realistic options in the current challenging commercial finance funding climate. There are several factors which will have an immediate impact on which financing alternatives can be considered. First, unsecured lines of credit are rapidly disappearing for many businesses because commercial lenders are eliminating or reducing this kind of working capital financing. Second, many regional banks have decided to stop or reduce their lending activities involving commercial mortgages and other commercial loans. Third, commercial construction financing is available on a very limited basis. Fourth, businesses which are not currently profitable or not current in their debt payments will encounter particular difficulties in seeking new funding. Fifth, many lenders are requiring more collateral for any new commercial loans.

The primary message of this article is to emphasize the importance for commercial borrowers of being more realistic when seeking new financing or refinancing. As noted above, there are some stark changes which now impact almost all new commercial loans. Despite these new and difficult challenges, most business owners will still be able to obtain new financing, although it is very likely that either the terms or kind of financing will be different from previous business financing arrangements.

For example, even though working capital loans are not as widely available as they were just a few months ago, this kind of commercial financing is still in fact obtainable. The main change for business borrowers is the likelihood that they will be dealing with a different commercial lender, since some of the largest providers have stopped making these loans. Furthermore, the lenders which are currently most willing to consider working capital funding are not aggressively promoting these particular financing activities.

Business cash advance programs which are based on credit card processing activity are another example of an increasingly practical commercial financing option in the midst of an uncertain economy. Although this business funding option has been available for several years, it has not been utilized by most small business owners. For most businesses which accept credit cards, business cash advances should be evaluated as an important tool for improving business cash flow. Commercial borrowers wanting to consider this financing alternative should consult with a commercial finance funding expert who is knowledgeable about both this specialized kind of working capital financing as well as commercial real estate loans and other commercial loans.

The Working Capital Journal is one of several commercial financing resources which should be reviewed regularly by small business owners to assist in keeping up with the imposing difficulties posed by rapid changes in the business finance funding climate. As noted below, there have been some surprising actions taken by lenders as a direct result of recent financial uncertainties. The increasingly complex and confusing environment for working capital finance is likely to produce several unexpected challenges for commercial borrowers.

The working capital finance industry has primarily been operating on a regional and local basis for many years. In response to cost-cutting that has permeated many industries, there has been a consolidation that has resulted in fewer effective commercial lenders throughout the United States. Most business owners have been understandably confused about what this might mean for the future of their commercial financing efforts, especially because this has happened in a relatively short period of time.

Of course, for some time there have been ongoing complex problems for commercial borrowers to avoid when seeking commercial loans. But what has produced a new set of business finance funding problems is that we appear to be entering a period which will be characterized by even more uncertainties in the economy. With little advance notice by lenders, previous standards and rules for working capital finance and commercial financing are likely to increasingly change.

With the current realization that substantial changes are likely in the near future for commercial finance funding throughout the United States, business owners should make an extended effort to understand what is happening and what to do about it. At the forefront of these efforts should be a review of what actions commercial lenders have already taken in recent months. The Working Capital Journal is one prominent example of a free public resource that will facilitate a better understanding of the responses by business lenders to recent economic circumstances.

By publicizing actions taken by commercial lenders, this will contribute to these two goals, both of which are likely to be helpful to typical business owners: (1) To assist in eliminating or reducing questionable lending practices by highlighting controversial lending tactics. (2) To help business owners prepare for commercial finance funding changes. Sources that currently include The Working Capital Journal are actively encouraging business owners to describe and report their financing experiences so that they can be shared with a broader audience to assist in this effort. Some of the most significant commercial financing changes reported so far by commercial borrowers involve working capital loans, commercial construction financing and credit card financing. A notable situation of concern is that predatory lending practices by credit card issuers have been reported by many business owners. Because they have been excluded from obtaining any new business financing by many banks, some specific businesses such as restaurants are having an especially difficult time recently.

One of the few recent bright spots in business finance funding, as noted in The Working Capital Journal, has been the continuing ability of business owners to obtain working capital quickly by business cash advance programs. For most businesses accepting credit cards, this commercial financing approach should be actively considered. Business cash advances are literally saving the day for many small business owners because most banks appear to be doing a terrible job of providing commercial loans and other working capital finance help in the midst of recent financial and economic uncertainties. For example, as noted above, restaurants are virtually unable to currently obtain commercial finance funding from most banks. Fortunately, restaurants accepting credit cards are in a good position to obtain needed cash from credit card receivables financing and merchant cash advances.