Commercial Loans and Working Capital Lenders to Avoid

Document Sample
Commercial Loans and Working Capital Lenders to Avoid Powered By Docstoc
					Avoiding critical problems is vital for a small business owner seeking help with
commercial loans. Successful working capital management especially requires that
problem lenders be avoided for business loans and commercial mortgage financing.

One of the most serious commercial loan situations is a small business commercial
lender that causes problems for their commercial borrowers on a repeating basis.
Commercial borrowers should be prepared to avoid certain problematic commercial
lenders unless alternative working capital loan options are impossible.

This article will not name specific lenders to avoid. However, we will describe the
importance of avoiding "problem commercial lenders". Key examples will be
provided to illustrate why prudent commercial borrowers should be prepared to avoid
a wide variety of existing commercial lenders when seeking viable commercial
mortgage and small business financing strategies.

I have been advising business owners for many years, and I have encountered many
commercial loan situations which have involved commercial lenders that I would not
recommend as a result. This conclusion is typically based on an obvious pattern of
lending abuses by select business financing providers.

As a first example of lenders to avoid, 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 mortgage
alternatives before accepting commercial financing terms that put them at a
competitive disadvantage.

The second example of lenders to avoid involves the commercial appraisal process.
For commercial mortgage loans, commercial appraisals are an unavoidable part of the
commercial loan underwriting process. The commercial appraisal process is lengthy
and expensive. 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.

The third example of lenders to avoid is illustrated by those which provide worthless
pre-approvals for commercial loans. Business borrowers often want an early
pre-approval for their business loan. The apparent result of the preliminary business
financing approval is that it will allow the borrower to make other business
commitments which are dependent on the commercial mortgage being approved.

Commercial borrowers should expect that a valid approval will not be regularly issued
in a day or so. Any form of commercial financing approval will be treated as a
binding action by ethical lenders. 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 loan process goes forward, commercial borrowers need to be
extremely wary of any commercial lenders that take this approach.

Why would a lender use a questionable commercial loan pre-approval? Here are two
primary possibilities. The first is to use a business financing pre-approval that is like a
residential mortgage structure. The second is to encourage the borrower to end their
consideration of other commercial lenders.

Since many commercial mortgage loans are arranged by residential mortgage brokers
who are frequently unfamiliar with common commercial loan procedures, this reason
will be especially applicable when dealing with commercial lenders that specialize in
dealing with residential mortgage brokers. This type of commercial lender should be
avoided at all costs for most business financing situations.

The fourth example of lenders to avoid is related to lack of sufficient lending
competition. It is not unusual for the leading small business lender in some markets to
use more restrictive commercial loan terms. Such lenders often take advantage of a
lack of other local commercial lenders. It is not wise for borrowers to rely upon local
and regional banks for most business financing requirements. For most lending
scenarios, a non-local lender can probably provide better business loan terms because
they are normally competing with other business lenders on a regular basis.

				
DOCUMENT INFO