Thursday, July 17, 2008
Working Capital Help
As most commercial borrowers have discovered by now, many local and regional banks are simply no longer interested in providing commercial loans and working capital financing. These lending institutions have rarely been the best source for small business financing, so this development does have some positive aspects for business owners. The decreasing role of regional lenders in providing viable business loans and commercial mortgages will impact most forms of commercial funding such as SBA loans. Commercial borrowers should explore alternative commercial financing sources before their bank pulls the plug on existing business finance programs.
Wednesday, April 16, 2008
Small Business Loans - Recall Possibilities
I recently published a special small business loans report which summarized the five factors which are likely to result in a worst case scenario for commercial funding. One of these issues was the presence of a recall possibility for commercial loans which allow the lender to call the loan, thus forcing the borrower to repay prior to the the loan expiration.
To avoid the recall situation in the first place, commercial borrowers would be wise to consider only commercial loans which will not have recall terms. Many traditional commercial lenders (especially local and regional banks) routinely place recall clauses in their loan agreements. The conditions which can trigger a recall will vary but will commonly include periodic review of financial statements and credit history by the lender. If specific income and credit standards are not met, then the bank will typically notify the commercial borrower that they must pay off the loan within a 30-90 day period. An even more onerous recall situation will exist if the lender can simply choose not to renew a loan on an annual basis regardless of income or financial conditions for the business.
When confronted with a recall notification, commercial borrowers will have little recourse other than to seek refinancing from another lender. In seeking alternative sources of commercial financing, prudent borrowers will eliminate potential lenders who will impose similar recall provisions in new financing. For commercial borrowers who currently have recall provisions in their business financing agreement but have not yet received a recall of their loan, it will be equally wise to consider refinancing their business loan before such a recall occurs so that refinancing is accomplished according to the commercial borrower's timetable and not that of the current commercial lender.
To avoid the recall situation in the first place, commercial borrowers would be wise to consider only commercial loans which will not have recall terms. Many traditional commercial lenders (especially local and regional banks) routinely place recall clauses in their loan agreements. The conditions which can trigger a recall will vary but will commonly include periodic review of financial statements and credit history by the lender. If specific income and credit standards are not met, then the bank will typically notify the commercial borrower that they must pay off the loan within a 30-90 day period. An even more onerous recall situation will exist if the lender can simply choose not to renew a loan on an annual basis regardless of income or financial conditions for the business.
When confronted with a recall notification, commercial borrowers will have little recourse other than to seek refinancing from another lender. In seeking alternative sources of commercial financing, prudent borrowers will eliminate potential lenders who will impose similar recall provisions in new financing. For commercial borrowers who currently have recall provisions in their business financing agreement but have not yet received a recall of their loan, it will be equally wise to consider refinancing their business loan before such a recall occurs so that refinancing is accomplished according to the commercial borrower's timetable and not that of the current commercial lender.
Thursday, February 28, 2008
Recent Magazine Article about Commercial Loans
I was interviewed several months ago for an article that was just published in the February 2008 issue of Entrepreneur Magazine (pages 64-65, entitled "Raising Money - The Real Estate Deal"). As is my regular perspective in the many commercial loan articles that I publish, this article focused on how to avoid common pitfalls and mistakes for business loans. I especially appreciated that the magazine published an article devoted to problems about commercial real estate loans, since the more common approach is to present a simplified overview that ignores the more complex issues.
Unfortunately most business lenders also tend to ignore many complicated small business funding and investing issues at the beginning of the loan process. Over the years at AEX Commercial Financing Group we have successfully built a solid niche for business financing by anticipating and attacking problematic circumstances before they become detrimental to the successful completion of commercial loans.
In addition to avoiding commercial funding problems that could occur in almost all lending situations, our most difficult role is often to help our business borrower clients avoid "problem lenders". In terms of solving business finance problems in the most effective sequence, the early elimination of inappropriate lenders is critical to the eventual conclusion of satisfactory working capital financing and small business cash management.
business
investing
real estate
SBA
Unfortunately most business lenders also tend to ignore many complicated small business funding and investing issues at the beginning of the loan process. Over the years at AEX Commercial Financing Group we have successfully built a solid niche for business financing by anticipating and attacking problematic circumstances before they become detrimental to the successful completion of commercial loans.
In addition to avoiding commercial funding problems that could occur in almost all lending situations, our most difficult role is often to help our business borrower clients avoid "problem lenders". In terms of solving business finance problems in the most effective sequence, the early elimination of inappropriate lenders is critical to the eventual conclusion of satisfactory working capital financing and small business cash management.
business
investing
real estate
SBA
Wednesday, January 30, 2008
Impacts of Interest Rate Declines on Business Financing
Many business owners are understandably confused about what impact recent interest rate reductions will have on their current and future business loans. Smart cash management and commercial finance decisions should not always be based on trends for short-term interest rates. I have previously commented in articles about avoiding problems with commercial loans that the lowest interest rate is rarely the "best" interest rate. My observation continues to be true in today's uncertain economic climate, and commercial borrowers should generally avoid working capital management decisions based solely on a desire to obtain a lower interest rate.
investment
loan
mortgage
investment
loan
mortgage
Wednesday, January 9, 2008
The Best and Worst Commercial Loan Strategies During 2007
I have just published the first in a series of business financing articles concerning positive and negative developments during 2007. One of the positive trends has been an interest rate decline. However many commercial borrowers with adjustable rate mortgages will NOT see a decrease in the rate for their commercial mortgage. My overview of the Best and Worst Business Loan Strategies for 2007 describes why this might happen.
business
finance
business
finance
Thursday, December 27, 2007
UPDATE: Business Loan and Commercial Real Estate Loan Strategies
During 2007 I have published dozens of business loan articles addressing a wide variety of business financing and commercial real estate financing problems. Unfortunately some of these issues have gotten worse in recent months. I will be distributing an overview of many important commercial loan trends during the next few weeks. In the meantime commercial borrowers should feel free to contact me directly to discuss any special business finance concerns that they have. Regardless of the many commercial loan articles which I publish, individualized discussions will generally prove to be a more effective solution for most commercial financing difficulties.
Monday, December 3, 2007
Commercial Loan and Commercial Real Estate Financing Fundamentals
Because investors are increasingly considering business opportunities and commercial property, it is important to their success that they receive a comprehensive introduction to the distinctions between residential real estate financing and commercial real estate - business opportunity investing. This business loan discussion will inform new business real estate investors about critical business financing factors.
SBA Loan Refinance and Business Finance Issues
Refinance requirements for business opportunity financing and a commercial real estate loan will usually be more difficult than the commercial loan for initial purchase. This is particularly evident with SBA loan refinancing. It is important to explore these likely refinancing problems before proceeding with any commercial real estate financing or business loan.
Business Finance Loan and Real Estate Mortgage Problems
A commercial mortgage has more potential difficulties in comparison to residential real estate mortgages. This effects the time consumed in finalizing even straightforward business finance scenarios. It is critical to anticipate and eliminate business opportunity financing and business loan problems that recur regularly.
Enhanced Value of Business Loan Experience
The obvious oversupply of inexperienced business opportunity financing and commercial real estate financing advisors and lenders must be a practical factor to anticipate, and a lack of meaningful experience can seriously complicate the loan process. This is due primarily to the negative residential real estate finance environment. Most residential mortgage brokers are trying to replace residential loan revenues with business loan transactions, but in most cases they are acting as business finance advisors without necessary commercial loan qualifications.
Time to Finalize a Business Opportunity Loan or Commercial Mortgage
Traditional banks will often have a lengthy business finance process lasting six to nine months. In contrast non-traditional business financing can be finalized more quickly but will typically be more lengthy than residential real estate financing. The inclusion of SBA financing and specialized business loan programs can add significant variation to the timing and complexity of finalizing a commercial loan.
Expected Business Loan and Business Opportunity Financing Fees
Because the business loan process is more complex and lengthy than residential real estate financing, a different fee structure should be expected. Initial commercial mortgage retainer fees are more commonplace than with a residential mortgage financing process. The business finance loan structure is characterized by several third-party costs such as appraisal and environmental requirements that contribute to substantial costs beyond the direct commercial lender fees.
Special Purpose Commercial Real Estate Finance
Commercial mortgage scenarios for specialized properties such as gas stations, churches, golf courses and funeral homes result in complications not witnessed with residential real estate financing. Specialized commercial property loans have been eliminated from an expanding group of business finance portfolios by business lenders. As a result of fewer lending options together with specialized business loan issues, church financing, funeral home financing and golf course financing are among the most problematic business opportunity finance or commercial loan situations.
More Differences - Business Opportunity Loan and Commercial Mortgage
The commercial mortgage and business loan process in the United States has many factors distinguishing it from residential real estate financing. Many significant topics not described in this discussion are explained in several other business finance reports. Some of the topics covered in separate reports are personal guarantor requirements, lender suitability criteria, business opportunity finance and SBA loan financing.
SBA Loan Refinance and Business Finance Issues
Refinance requirements for business opportunity financing and a commercial real estate loan will usually be more difficult than the commercial loan for initial purchase. This is particularly evident with SBA loan refinancing. It is important to explore these likely refinancing problems before proceeding with any commercial real estate financing or business loan.
Business Finance Loan and Real Estate Mortgage Problems
A commercial mortgage has more potential difficulties in comparison to residential real estate mortgages. This effects the time consumed in finalizing even straightforward business finance scenarios. It is critical to anticipate and eliminate business opportunity financing and business loan problems that recur regularly.
Enhanced Value of Business Loan Experience
The obvious oversupply of inexperienced business opportunity financing and commercial real estate financing advisors and lenders must be a practical factor to anticipate, and a lack of meaningful experience can seriously complicate the loan process. This is due primarily to the negative residential real estate finance environment. Most residential mortgage brokers are trying to replace residential loan revenues with business loan transactions, but in most cases they are acting as business finance advisors without necessary commercial loan qualifications.
Time to Finalize a Business Opportunity Loan or Commercial Mortgage
Traditional banks will often have a lengthy business finance process lasting six to nine months. In contrast non-traditional business financing can be finalized more quickly but will typically be more lengthy than residential real estate financing. The inclusion of SBA financing and specialized business loan programs can add significant variation to the timing and complexity of finalizing a commercial loan.
Expected Business Loan and Business Opportunity Financing Fees
Because the business loan process is more complex and lengthy than residential real estate financing, a different fee structure should be expected. Initial commercial mortgage retainer fees are more commonplace than with a residential mortgage financing process. The business finance loan structure is characterized by several third-party costs such as appraisal and environmental requirements that contribute to substantial costs beyond the direct commercial lender fees.
Special Purpose Commercial Real Estate Finance
Commercial mortgage scenarios for specialized properties such as gas stations, churches, golf courses and funeral homes result in complications not witnessed with residential real estate financing. Specialized commercial property loans have been eliminated from an expanding group of business finance portfolios by business lenders. As a result of fewer lending options together with specialized business loan issues, church financing, funeral home financing and golf course financing are among the most problematic business opportunity finance or commercial loan situations.
More Differences - Business Opportunity Loan and Commercial Mortgage
The commercial mortgage and business loan process in the United States has many factors distinguishing it from residential real estate financing. Many significant topics not described in this discussion are explained in several other business finance reports. Some of the topics covered in separate reports are personal guarantor requirements, lender suitability criteria, business opportunity finance and SBA loan financing.
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