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Business Loan Options Hurt by Commercial Lending Changes |
Article Submitted by: karle donald
Tuesday, 02 March 2010
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The four business lending changes described below are unfortunately the proverbial tip of the iceberg for commercial borrowers. In addition to these changes and potential risk factors, there are additional problems that should be anticipated. As they approach business lenders to obtain working capital and small business financing, business owners will need to be especially skeptical and diligent. Many banks have effectively stopped making any new commercial financing to small businesses regardless of business income or creditworthiness.
Unfortunately these banks are not announcing publicly that they have discontinued working capital activities. This means that while they might accept small business financing applications, they do not intend to actually finalize commercial funding in all cases. This approach has clearly frustrated and angered business borrowers.
The four recent commercial lending changes described in this article are likely to impact most business owners. If a commercial borrower wants to continue their present banking relationship, in most cases they will find that the business banking changes are permanent and cannot be avoided.
In the first example of commercial lending changes, for business finance programs many small business owners have already discovered an inflated fee structure from most banks. Needing to find a revenue source to replace diminishing income from business loans (which has resulted from bank decisions to decrease small business finance activity) is perhaps one bank perspective for the commercial loan fee increases. Except for unusual and unavoidable circumstances, borrowers should analyze different business funding sources when they encounter increased working capital fees levied by their current bank.
A second significant commercial lender change is demonstrated by revised guidelines for refinancing commercial real estate loans. In almost all cases, business lenders have dramatically reduced the loan-to-value percentages that they will lend. In some areas and for specific types of businesses, many banks will no longer lend over half of the appraised value. The difficulty for a commercial borrower refinancing an existing commercial loan reaches 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 lending problem is compounded even more when a current appraisal shows a decrease in value since the loan was originally made. This outcome is especially common in the midst of a distressed economy which leads to decreased business income that in turn often produces a lower commercial property value.
The difficulty of locating investment property financing illustrates another business banking change. If the commercial property is considered to be owner-occupied (the owner occupies a substantial portion of the building), more banks will be interested in making commercial real estate loans. Investors that do not occupy the property often own business investments like shopping centers and apartments. For many banks, it appears that they are currently restricting their commercial lending activities to those which qualify for Small Business Administration financing (SBA loans) which generally exclude investor-owned situations.
One of the biggest business lending changes involves new guidelines for working capital financing. Most banks appear to be quietly eliminating business lines of credit or severely reducing the amount they are willing to finance to a level which is not helpful to an average business. To replace the disappearing commercial lines of credit, the most practical choices for business borrowers include working capital financing and business cash advances from one of the alternative business finance sources still active in business financing programs. This change promises to receive the highest priority from most business owners because very few small businesses can survive without a reliable source of working capital loans.
Steve Bush and AEX Commercial Financing Group are a reliable source of business financing options. Stephen has offered effective advice to business borrowers for 20 years and delivers merchant cash advances and small business loans Article Source: http://www.ArticleBlast.com |
About The Author:
Commercial lending changes have reduced small business finance alternatives for many small businesses.
Commercial lending changes have reduced small business finance alternatives for many small businesses.
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