One of the most serious working capital financing scenarios is a lender that causes difficulties for their small business commercial borrowers on a regular basis. It is specifically this kind of commercial lender which informed commercial borrowers should be prepared to avoid unless realistic alternative options for commercial loans and commercial mortgages are totally impractical.
Avoiding critical problems is vital for a small business owner seeking help with commercial loans. Successful working capital management especially requires that problem lenders be avoided for business loans and commercial mortgage financing.
One of the most serious commercial loan situations is a small business commercial lender that causes problems for their commercial borrowers on a repeating basis. Commercial borrowers should be prepared to avoid certain problematic commercial lenders unless alternative working capital loan options are impossible.
This article will not name specific lenders to avoid. However, we will describe the importance of avoiding "problem commercial lenders". We will provide several examples to demonstrate why commercial borrowers should be prepared to avoid a number of commercial lenders when seeking commercial mortgages and small business financing.
I have been advising business owners for many years, and I have encountered many commercial loan situations which have involved commercial lenders that I would not recommend as a result. This conclusion is typically based on an obvious pattern of lending abuses by select business financing providers.
As a first example of lenders to avoid, I have published an article which discusses the tendency of many banks to say "yes" when they mean "no". Such banks will typically attach onerous business financing conditions to commercial loans instead of simply declining the loan. Business owners should explore other commercial mortgage alternatives before accepting commercial financing terms that put them at a competitive disadvantage.
The second example of lenders to avoid involves the commercial appraisal process. For commercial mortgage loans, commercial appraisals are an unavoidable part of the commercial loan underwriting process. The process to obtain commercial appraisals is expensive and lengthy. Avoiding commercial lenders which have displayed a pattern of problems and abuses in this area will benefit the commercial borrower by saving them both time and money.
The third example of lenders to avoid is illustrated by those which provide worthless pre-approvals for commercial loans. Business borrowers often want an early pre-approval for their business loan. The apparent result of the preliminary business financing approval is that it will allow the borrower to make other business commitments which are dependent on the commercial mortgage being approved.
Commercial borrowers should expect that a valid approval will not be regularly issued in a day or so. Any form of commercial financing approval will be treated as a binding action by ethical lenders. Nevertheless there are commercial lenders who provide their own special version of a pre-approval within just a few days of receiving preliminary application information. Because this abbreviated approach to pre-approvals almost always produces unexpected surprises for the commercial borrower as the business loan process goes forward, commercial borrowers need to be extremely wary of any commercial lenders that take this approach.
You might ask why any lender would use a misleading pre-approval for a commercial loan? Here are two primary possibilities. The first is to use a business financing pre-approval that is like a residential mortgage structure. A second reason is to cause borrowers to prematurely end their financing search due to the often false hope created by an artificial approval.
Since many commercial mortgage loans are arranged by residential mortgage brokers who are frequently unfamiliar with common commercial loan procedures, this reason will be especially applicable when dealing with commercial lenders that specialize in dealing with residential mortgage brokers. This type of commercial lender should be avoided at all costs for most business financing situations.
The fourth example of lenders to avoid is related to lack of sufficient lending competition. It is not unusual for the leading small business lender in some markets to use more restrictive commercial loan terms. This lack of other local lenders is often taken advantage of by such problem lenders. It is not wise for borrowers to rely upon local and regional banks for most business financing requirements. For most lending scenarios, a non-local lender can probably provide better business loan terms because they are normally competing with other business lenders on a regular basis.
Failure to Communicate Within a Small Business
A failure to communicate can create havoc in several critical areas for small businesses. Three potential solutions include business training, negotiating and writing. Ironically these functions are also among the most likely to be severely impacted by a failure to use business communications strategies effectively in the first place.
Communication Strategies for Small Businesses
When individuals and businesses talk about communication, there can be many possibilities as to what they are including in the topic. While cell phones and tablet computers might be relevant to small business owners, the more actionable areas of interest are likely to include business proposals, negotiating and teamwork. Writing seems to have fallen into neutral territory as a strategy for communicating, and along with that the use of business proposal writing has also declined within many small businesses. Until companies discover more effective business development strategies, writing business proposals should be looked at closely.
Finance and Business Mistakes
Business and finance mistakes can be costly and cause other serious complications. While it can be helpful to learn from mistakes, it is also preferable to avoid such situations whenever possible.
