Small Business Loans Funding
Worst Case Possibilities to Avoid
The primary purpose of this article is to focus on a particular combination of commercial loan and commercial mortgage problems with immediate and major negative consequences.
It is important to have an understanding of what can go wrong with small business loans funding. The unique combination of factors noted below can have particularly negative financial results for commercial loans and commercial real estate loans. Business owners should be prepared in advance for these problematic circumstances so that they can develop contingency plans.
Commercial borrowers should also realize that there are a number of other serious problems with small business loans which borrowers should have a similar awareness of in order to avoid unnecessary complications.
Like the perfect storm, the worst case scenario for borrowers seeking commercial loans is not an event that most people will want to actually experience. There are five elements that we believe will usually produce this negative result when they are present at the same time.
These are the factors which we believe will typically result in a worst case result for small business loans if all five are present:
1 — Dealing with an inexperienced business loan advisor
2 — Using a lender with a poor track record for commercial financing
3 — Short-term financing which a borrower is not permitted to lengthen to a longer-term
4 — Obtaining commercial loans that include a recall option for the lender
5 — Non-competitive business financing terms
Our advice is to especially avoid circumstances where all five issues exist simultaneously. There can still be many acceptable business finance scenarios where it will not be possible to avoid all five factors. A further recommendation is to also seek alternative financing when either of the first two elements are present. Two points deserve particular emphasis.
First, the worst case scenario for commercial loans is avoidable.
However, if you want to avoid an obstacle, it is critical that you have a good understanding of what you are avoiding, what it looks like and any special avoidance techniques required. 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. Unfortunately, without adequate information, most business owners will not be prepared to recognize the appropriate warning signs for avoiding serious commercial finance hazards.
Second, business financing is more complicated than most borrowers realize.
There are a number of additional serious business loan obstacles beyond those noted here. A comprehensive approach to commercial real estate loans and other commercial loans should incorporate a balanced analysis of both the worst case aspects and other key small business funding terms.
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