Financial Strategies

This business financing strategy article will describe the importance of avoiding “problem commercial lenders”. The article will NOT name specific lenders to avoid, but key examples will be provided to illustrate why prudent commercial borrowers should be prepared to avoid a wide variety of existing commercial lenders in their search for viable business financing strategies.

I have been advising business owners for over 25 years, and I have encountered many business financing situations which have involved commercial lenders that I would not recommend as a result. These problematic situations have especially involved commercial mortgage loans, business cash advance situations and unsecured working capital loans. As a direct result of these experiences and daily conversations with other commercial loan professionals, I do in fact believe that there are a number of commercial lenders that should be avoided. This conclusion is typically based on more than one negative experience or an obvious pattern of lending abuses.

I have published many commercial loan articles which are designed to assist commercial borrowers in avoiding business loan problems. One of the most serious business financing situations is a commercial lender that causes business loan problems for their commercial borrowers on a recurring basis. It is particularly this type of commercial lender which prudent commercial borrowers should be prepared to avoid unless viable alternative business financing options do not realistically exist.

Here are a few examples of why certain commercial lenders should be avoided.

BUSINESS FINANCING STRATEGIES AND COMMERCIAL LENDERS TO AVOID EXAMPLE NUMBER 1 – Yes or No?

I have published an article which discusses the tendency of many banks to say “YES” when they mean “NO”. Such banks will typically attach onerous business financing conditions to commercial loans instead of simply declining the loan. Business owners should explore other commercial loan alternatives before accepting business financing terms that put them at a competitive disadvantage.

BUSINESS FINANCING STRATEGIES AND COMMERCIAL LENDERS TO AVOID EXAMPLE NUMBER 2 – The Commercial Appraisal Process

For commercial real estate loans, commercial appraisals are an unavoidable part of the commercial loan underwriting process. The commercial appraisal process is lengthy and expensive, so avoiding commercial lenders which have displayed a pattern of problems and abuses in this area will benefit the commercial borrower by saving them both time and money.

BUSINESS FINANCING STRATEGIES AND COMMERCIAL LENDERS TO AVOID EXAMPLE NUMBER 3 – Think Outside the Bank

In smaller metropolitan markets, it is not unusual for a dominant commercial lender to impose harsher commercial loan terms than would typically be seen in a more competitive commercial financing market. Such commercial lenders routinely take advantage of a relative lack of other commercial lenders in their local market. An appropriate response by commercial borrowers is to seek out non-bank business financing options. It is neither necessary nor wise for commercial borrowers to depend only upon local traditional banks for working capital and business cash advance solutions. For most business financing situations, a non-local and non-bank commercial lender is likely to provide improved commercial financing terms because they are accustomed to competing aggressively with other commercial lenders.

BUSINESS FINANCING STRATEGIES AND COMMERCIAL LENDERS TO AVOID EXAMPLE NUMBER 4 – Meaningless Pre-approvals

Commercial borrowers frequently want a commercial lender to approve their commercial loan at the earliest possible point. The assumed benefit to this early business loan approval is that it will enable the commercial borrower to make other business plans which depend on the business financing being finalized.

Because an ethical commercial lender will treat any form of an approval very seriously, commercial borrowers should expect that a meaningful version of such an approval will not be realistically possible in just two or three days. Nevertheless there are commercial lenders who provide their own special version of a pre-approval within just a few days of receiving preliminary application information. Because this abbreviated approach to pre-approvals almost always produces unexpected surprises for the commercial borrower as the business financing process goes forward, commercial borrowers need to be extremely wary of any commercial lenders that take this approach.

Why do some commercial lenders provide such meaningless pre-approvals? There are two likely reasons. (1) To motivate the commercial borrower to stop considering other potential commercial lenders. (2) To provide a pre-approval that is similar to a structure prevalent with residential mortgage loans. Since many business loans are arranged by residential mortgage brokers who are frequently unfamiliar with common business financing procedures, this reason will be especially applicable when dealing with commercial lenders that specialize in dealing with residential mortgage brokers.

Copyright 2005-2007 AEX Commercial Financing Group, LLC. All Rights Reserved.

Although banks and other business lenders have made a pointed effort to portray themselves as lending normally, very few business owners are likely to suggest that there is anything normal about obtaining financing from current commercial finance programs. It has become a routine occurrence for small business owners to be told by their current commercial lender that it will be necessary to seek another source for commercial loans and working capital.

I published several earlier articles which addressed some of the problems that commercial borrowers are experiencing when they attempt to obtain working capital financing and commercial loans. It has become clear that current commercial lending conditions have become even more difficult for most business owners. For example, one of these commercial finance reports described the unfortunate possibility of firing your banker as one of several guerrilla financing techniques that might be required for a small business to survive in the face of extreme business banking conditions.

It would not be realistic to suggest that there are one or two obvious business lending sources that will solve the working capital needs for all businesses in need of help. Nevertheless I would not advocate the guerrilla financing tactic of firing your bank and your banker if there were not suitable alternative sources for small business financing.

Identifying the most likely alternatives can be accomplished in several ways but one of the most effective approaches will include detailed discussions with commercial loans experts that are experienced in nationwide business financing similar to what the business owner currently needs. Realistically the search for new commercial lending sources must start with an admission from a small business owner that they do in fact need to find a new source for business loans.

The best commercial finance solutions will depend on the business location, type of financing, kind of business, operating history and size of loan desired. A key point for business owners to remember is that there really are a number of viable and effective commercial lenders that are currently active in making commercial loans to businesses that are in desperate need of commercial financing. Some of the most realistic sources for small business loans are operating regionally rather than nationally.

In addition to the advice contained in this article, small business owners should review commercial finance resources such as The Working Capital Management Guide, a free online publication which focuses on short term capital financing strategies. Commercial borrowers should also have a candid discussion with a commercial loan expert who is capable of providing appropriate help for their unique business financing needs.

A business needs a constant supply of ready cash in order to keep on functioning. It also needs funds to grow and expand. A working capital loan is the ideal solution. Whether you are looking to purchase new equipment for your business, or planning to add to your inventory, or thinking of opening new branches at new locations or remodel the existing ones, or launching advertising and promotional programs for your business, or simply in need to pay off your debts immediately, working capital loan can take care of all your financial needs easily. If you are need of some quick financing for your business needs, consider working capital loan as an excellent option.

Working capital financing available to businesses comes in two flavors. Both have their merits. So the next time you think of getting working capital financing, get ready to choose from between a working capital loan and a business cash advance. Let’s take a closer look at each.

Getting working capital financing for your business has its share of woes and worries. Most often, people tend to confuse a working capital loan with a business cash advance. However, there are important differences between the two. To start with, business cash advance is usually easier to secure than a working capital loan. This is one of the reasons why many prefer a business cash advance over a working capital loan as a quick way of getting cash to support their businesses.

Most lenders and financial bodies will take into account the credit history of the borrower, available collaterals and various other factors before putting their approval on granting a working capital loan. On the other hand, getting qualified for a business cash advance is a much simpler process. There is less paperwork involved and the money reaches the applicant in less than 72 hours. Receiving money from a working capital loan usually takes about a week.

A business cash advance is not associated with a fixed schedule for repayment. The method of repayment is linked to credit card sales receipts and therefore, it is a much more natural process. As such, businesses usually do not feel acutely pressurized over repayment issues. This, unfortunately, is not the scenario with working capital loans which are based on a fixed repayment schedule that the borrower must stick to. Failing to do so would affect the borrower’s credit score adversely and there is a chance of losing the collateral also. The bottom-line is that no matter what the volume of business for a particular month is, the working capital loan has to be repaid according to the pre-determined fixed amount.

In spite of these difficulties, a working capital loan remains a great way to provide your business the cash it needs to keep growing till such a point where all operating expenses are covered by the revenue that the business generates. Most small businesses require one to stay afloat and make to the next level of self-sufficiency. However, it is important to bear in mind the importance of maintaining good business credit scores in order to qualify for a working capital loan. With good business credit scores, you can stay assured of getting the working capital loan that you seek quickly and effortlessly.

So where should you start when you need a working capital loan? Try the Internet. There’s no dearth of very competent and reputed lenders on the Net today. All it takes is just a few clicks of your mouse to zero in on the best terms and qualify for a working capital loan for your business needs.