Determining Realistic Choices for Small Business Financing
It is of critical importance that small business owners assess their most effective and practical options when facing business financing decisions. This will not be a simple task in view of volatile conditions which have recently impacted credit markets. A very common example of the problem is illustrated by how much misinformation and confusion there has been about business financing and working capital availability. Perhaps the most difficult challenge for business borrowers is obtaining accurate information about what is possible in realistic terms.
Even for business owners who are satisfied with their current commercial finance arrangements, it is advisable to explore commercial financing options that might be necessary if economic conditions change further. An important tool to assist commercial borrowers in this process is the use of Plan B contingency financing.
There are a number of harsh realities which must be confronted by all commercial borrowers when assessing their realistic options in the current challenging working capital financing climate. Here are five issues likely to impact most current small business financing decisions:
- Unsecured commercial lines of credit are rapidly disappearing for many small businesses because lenders are eliminating or reducing this kind of working capital financing.
- Lending activities involving small business financing and commercial mortgages have been stopped by many local and regional banks.
- Commercial construction financing is available on a very limited basis.
- Particular difficulties will be encountered by businesses which are not currently profitable or not current in their debt payments.
- Many lenders are requiring more collateral for any new commercial loans.
As noted above, small business owners should expect a number of stark changes effecting most working capital and business financing situations. While it is probable that either the kind or terms of financing will differ from previous business finance arrangements, most small business owners will be able to obtain financing despite these difficult new obstacles.
The primary message of this report is to emphasize the importance for commercial borrowers of being more realistic when seeking new financing or refinancing. As an example, short-term working capital loans are still available. 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 business loans. Furthermore, the lenders which are currently most willing to consider working capital financing are not aggressively promoting these particular financing activities.
Another example of an increasingly practical commercial financing option in the midst of an uncertain economy is a merchant cash advance program based on credit card processing activity. This business funding option has not been widely utilized by small businesses even though it has been available for several years. For most businesses which accept credit cards, merchant 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 small business financing expert who is knowledgeable about both this specialized kind of working capital management strategy as well as commercial real estate loans and other commercial loans.
One of the biggest new commercial financing problems has been that many lenders have simply stopped making business loans. While this is a serious problem, an even bigger problem currently emerging is that many commercial lenders are not informing their business owner clients on a timely basis of their inability to provide commercial loans. There are a surprising number of reports from commercial borrowers that they waited one or two months (or more) to complete the commercial mortgage process, only to be told at the last minute that the commercial loan would not be approved.
A related new business financing problem is the growing shortage of lenders that will provide short-term working capital. While the number of lenders providing commercial real estate loans (which require the property as collateral) is shrinking, working capital financing (which does not require separate collateral) has become very hard to find consistently. Because even thriving businesses usually need regular financing help with short term commercial loans, this particular problem is currently impacting virtually all businesses.
For such serious business loan problems, the solutions will of course vary based on circumstances. Commercial borrowers should be encouraged to know that they have more business finance choices than they probably realize. In most cases, finding and solving the commercial financing obstacles will be somewhat (or perhaps much) easier with the help of a business financing expert. On a precautionary note, when seeking commercial finance solutions, small business owners should probably avoid the bank or banker that caused their working capital and commercial loan problems in the first place.
Contact Information
AEX Commercial Financing Group
Stephen Bush
Chief Executive Officer
Phone: (614) 335-4901
Email: BUSH@AEXLLC.COM
