If a small business borrower wants to continue their present banking relationship, you'll probably find that changes in recent business loans are permanent and can not escape. A small number of sources of new and flexible lending businesses provide a welcome exception to this trend. However the business lender changes may affect most business owners.
One of the biggest commercial lending changes involves new guidelines for capital funding. Most banks appear to be quietly eliminating business lines of credit or severely reducing the amount they are willing to finance at a level that is not useful for a business on average. This change promises to receive the highest priority from most small businesses because very few businesses can survive without a reliable source of working capital. To replace the disappearing commercial lines of credit, most practical options for business borrowers include working capital loans and merchant financing from one of the sources of alternative commercial finance still active in financing programs for small businesses.
The difficulty of locating financing investment property illustrates another business lender change. If the commercial property is considered which is owner-occupied (the owner occupies a substantial part of the building), more banks will be interested in making commercial real estate loans. Commercial properties such as apartment buildings and shopping centers are often held by investors who do not occupy the property. For many banks, it appears that they are currently restricting their commercial lending activities to those who qualify for loans from the SBA (Small Business Administration), commonly exclude situations owned by investors.
Checked for refinancing loans for commercial real estate guidelines show a third shift significant business loans. In almost all cases, commercial lenders have dramatically reduced the percentage of loan to value that are going to pay. Many banks do not pay more than half the appraised value of the specific types of business in some areas. The difficulty for a commercial borrower refinancing an existing commercial loan reached a crisis level very quickly when this happens. In many cases the original business loan was based on a much higher percentage of business value than the bank is currently willing to provide. The problem is further complicated loans when a current appraisal reveals a decrease in value since the original loan was made. This result is particularly widely seen amid a struggling economy that leads to decreased business income which in turn often results in a value lower commercial property.
In a fourth example of commercial lending changes, for virtually all small business finance programs many small business owners have already discovered a structure inflation rates of most banks. Perhaps the bank perspective for some of the commercial financing fee increase is needed to find a source of income to replace income decreased small business loans which has resulted from bank decisions to decrease activity commercial loans. When they are suddenly increased business financing fees applied by their current bank, business borrowers should seek different commercial funding sources except in unavoidable and unusual circumstances.
A final example of commercial lender changes is depicted by banks changing their overall guidelines for small business financing. Many banks have effectively stopped making new commercial loans to small businesses regardless of business income or creditworthiness. Unfortunately these banks are not announcing publicly that they have discontinued financing activities of small businesses. This means that if you could accept business loan applications, they do not intend to actually finalize commercial financing in most cases. Whenever it becomes obvious that the bank has no real intentions of making a capital loan or commercial mortgage work required, this approach has clearly frustrated and enraged business borrowers.
The five commercial lending changes described above are unfortunately the tip of the iceberg. Small business owners have to be especially diligent and skeptical when they approach commercial lenders for commercial real estate loans, business financing and working capital financing.
Small business loans has been slow to recover even when the US economy has improved, but a crop of new lenders are filling the void.