| This business financing strategy article will | | | | BUSINESS FINANCING STRATEGIES AND COMMERCIAL |
| describe the importance of avoiding "problem | | | | LENDERS TO AVOID EXAMPLE NUMBER 3 - Think |
| commercial lenders". The article will NOT | | | | Outside the Bank |
| name specific lenders to avoid, but key | | | | |
| examples will be provided to illustrate why | | | | In smaller metropolitan markets, it is not |
| prudent commercial borrowers should be | | | | unusual for a dominant commercial lender to |
| prepared to avoid a wide variety of existing | | | | impose harsher commercial loan terms than |
| commercial lenders in their search for viable | | | | would typically be seen in a more competitive |
| business financing strategies. | | | | commercial financing market. Such commercial |
| | | | lenders routinely take advantage of a |
| I have been advising business owners for over | | | | relative lack of other commercial lenders in |
| 25 years, and I have encountered many | | | | their local market. An appropriate response |
| business financing situations which have | | | | by commercial borrowers is to seek out |
| involved commercial lenders that I would not | | | | non-bank business financing options. It is |
| recommend as a result. These problematic | | | | neither necessary nor wise for commercial |
| situations have especially involved | | | | borrowers to depend only upon local |
| commercial mortgage loans, business cash | | | | traditional banks for working capital and |
| advance situations and unsecured working | | | | business cash advance solutions. For most |
| capital loans. As a direct result of these | | | | business financing situations, a non-local |
| experiences and daily conversations with | | | | and non-bank commercial lender is likely to |
| other commercial loan professionals, I do in | | | | provide improved commercial financing terms |
| fact believe that there are a number of | | | | because they are accustomed to competing |
| commercial lenders that should be avoided. | | | | aggressively with other commercial lenders. |
| This conclusion is typically based on more | | | | |
| than one negative experience or an obvious | | | | BUSINESS FINANCING STRATEGIES AND COMMERCIAL |
| pattern of lending abuses. | | | | LENDERS TO AVOID EXAMPLE NUMBER 4 - |
| | | | Meaningless Pre-approvals |
| I have published many commercial loan | | | | |
| articles which are designed to assist | | | | Commercial borrowers frequently want a |
| commercial borrowers in avoiding business | | | | commercial lender to approve their commercial |
| loan problems. One of the most serious | | | | loan at the earliest possible point. The |
| business financing situations is a commercial | | | | assumed benefit to this early business loan |
| lender that causes business loan problems for | | | | approval is that it will enable the |
| their commercial borrowers on a recurring | | | | commercial borrower to make other business |
| basis. It is particularly this type of | | | | plans which depend on the business financing |
| commercial lender which prudent commercial | | | | being finalized. |
| borrowers should be prepared to avoid unless | | | | |
| viable alternative business financing options | | | | Because an ethical commercial lender will |
| do not realistically exist. | | | | treat any form of an approval very seriously, |
| | | | commercial borrowers should expect that a |
| Here are a few examples of why certain | | | | meaningful version of such an approval will |
| commercial lenders should be avoided. | | | | not be realistically possible in just two or |
| | | | three days. Nevertheless there are commercial |
| BUSINESS FINANCING STRATEGIES AND COMMERCIAL | | | | lenders who provide their own special version |
| LENDERS TO AVOID EXAMPLE NUMBER 1 - Yes or | | | | of a pre-approval within just a few days of |
| No? | | | | receiving preliminary application |
| | | | information. Because this abbreviated |
| I have published an article which discusses | | | | approach to pre-approvals almost always |
| the tendency of many banks to say "YES" when | | | | produces unexpected surprises for the |
| they mean "NO". Such banks will typically | | | | commercial borrower as the business financing |
| attach onerous business financing conditions | | | | process goes forward, commercial borrowers |
| to commercial loans instead of simply | | | | need to be extremely wary of any commercial |
| declining the loan. Business owners should | | | | lenders that take this approach. |
| explore other commercial loan alternatives | | | | |
| before accepting business financing terms | | | | Why do some commercial lenders provide such |
| that put them at a competitive disadvantage. | | | | meaningless pre-approvals? There are two |
| | | | likely reasons. (1) To motivate the |
| BUSINESS FINANCING STRATEGIES AND COMMERCIAL | | | | commercial borrower to stop considering other |
| LENDERS TO AVOID EXAMPLE NUMBER 2 - The | | | | potential commercial lenders. (2) To provide |
| Commercial Appraisal Process | | | | a pre-approval that is similar to a structure |
| | | | prevalent with residential mortgage loans. |
| For commercial real estate loans, commercial | | | | Since many business loans are arranged by |
| appraisals are an unavoidable part of the | | | | residential mortgage brokers who are |
| commercial loan underwriting process. The | | | | frequently unfamiliar with common business |
| commercial appraisal process is lengthy and | | | | financing procedures, this reason will be |
| expensive, so avoiding commercial lenders | | | | especially applicable when dealing with |
| which have displayed a pattern of problems | | | | commercial lenders that specialize in dealing |
| and abuses in this area will benefit the | | | | with residential mortgage brokers. |
| commercial borrower by saving them both time | | | | |
| and money. | | | | Copyright 2005-2007 AEX Commercial Financing |
| | | | Group, LLC. All Rights Reserved. |