Small Business Financing Loans
small business financing loans
Small business financing and Commercial Loans – What to Avoid
It is always advisable to have a detailed understanding of what can go wrong with commercial loans and working capital financing. The five factors described can have negative and long-lasting financial results for small business loans and commercial real estate loans. business owners should be prepared for these real possibilities.
Most commercial borrowers do not want to experience a worst case for commercial real estate loans and small business loans. There are several elements that we believe will almost always produce this serious but avoidable result when they are all present simultaneously. Understanding each of the issues should enable borrowers to avoid a potentially devastating working capital financing outcome.
Here are the issues which we believe will usually result in a worst case scenario for commercial loans if all five are present: (1) Dealing with an inexperienced commercial finance advisor; (2) Using a lender which historically has an unacceptable track record for successfully completing commercial loans; (3) Obtaining business financing that includes a recall option for the lender; (4) Inappropriate and non-competitive business loan terms; and (5) Short-term financing in which a borrower is not also offered the opportunity to lengthen to a longer-term period.
Our primary advice is to totally avoid circumstances where all five factors exist at the same time. A secondary recommendation is to also seek alternative financing for commercial loans when either of the first two elements are present. There are likely to be many working capital management scenarios where it will be impractical to avoid all of the issues described in the preceding paragraph.
Business owners should make every possible effort to obtain commercial financing in which the worst case situation is not present. Business owners will subject themselves to inappropriate business financing terms for a very long time if they do not take appropriate action before they finalize commercial loans. There are two points which should be emphasized.
First, small business loans are more complex than most borrowers realize. There are a number of additional serious commercial funding obstacles beyond those noted in this brief article. Because of this, it is important for commercial borrowers not to narrowly focus on the factors included in the worst case scenario discussed here and simply avoid these specific issues.
A comprehensive approach to working capital management should incorporate a balanced analysis of both the worst case aspects and other critical business finance terms. The importance of this overall perspective is why we emphasized the critical nature of avoiding both inexperienced brokers and lenders.
Second, the worst case scenario for business loans described above is totally avoidable. But to avoid an obstacle, it is critical that you have a working understanding of what you are avoiding, what it looks like and any special techniques required to evade it. For example, if you are driving a car, it is common sense that you will not intentionally drive your vehicle over sharp pointed objects that are likely to puncture your tires.
With commercial loans and commercial real estate loans, the combination of the five factors noted previously in this article will typically produce an impact for small business funding that is equivalent to much worse than simply puncturing a tire. Unfortunately, without proper advice and knowledge, most business owners will not be prepared to recognize the appropriate warning signs for avoiding business financing hazards.
In this article we focused on problems with small business financing that will almost always have long-lasting and immediate negative results for business owners. Commercial borrowers should not overlook the multitude of other serious problems with commercial loans beyond those described. As with the circumstances noted above, most of the other potential difficulties with business loans can also be avoided.
About the Author
Obtain business cash advance strategies and learn how to avoid problems with small business loans at AEX Commercial Financing Group. Steve Bush is a commercial finance expert =>
http://aexcfg.com
Are banks still giving loans to start a small business?
I am thinking of going into business for myself but I don’t want to go through the whole process of putting together a business plan if I cannot get financing.
I can’t blame you, Chaquita. In this recession, no one wants to waste time and it certainly feels that the banks have shut the spigot; loans backed by small business administration funds were down more than 30 percent in the past year to less than 45,000 loans.
But recent months aren’t nearly as bleak. While banks continue to look hard at their current loan portfolios as well any new loans, cash is starting to flow again. With federal stimulus dollars feeding the SBA’s 7(a) loan program (the largest one for small-company lending), the amount of federally backed credit jumped in the last 2 quarters. The SBA backed $3.5 billion in the quarter ended September 30, nearing a level we haven’t seen in 2 years.
There are still some major question marks out there, not the least of which is whether CIT, the largest small-business lender in 2008, will be forced into bankruptcy in the next week or two. The company is in dire trouble, a financial move that could crimp the credit markets again. But community, regional and even national banks still are out there for the right businesses, especially if the stimulus money keeps flowing.
That’s a big if, by the way, and a reason why you might consider putting your loan application on the fast track: The stimulus funds fueling the SBA’s increased volume are on track to run out of money by the end of 2009, even though the pool is authorized until September 2010. I expect Congress and the White House to push for additional funds.
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