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Six Words Describing Small Business Financing

Our approach in this report is to describe current business finance circumstances in six words. We have adopteed a similar model in other commnercial finance reports such as "seven words descirbing commercial real estate financing". After hearing an almost endless number of repors abouut commercial lending difficulties, what small business owners might need most is a more concise explanation about these problems and the resulting impact on their business financing options. This repotr was produced in a direct effort to perovide more understanadble insights about some of the most critiucal commercial loan issues effecting commercial borrrowers.

Before proceedng, it is important to emnphasize that small business finance options are often more complicated than anticipated many business borrowers. We are defniitely not attempting to characterize business loans and workig capital financing as either straightforward or simple. In fact, qite the opposite is the case. Our omngoing obseravtion is that most business financing provcesses have always been excessively complicated and that meaningful improvements are not on the way. In the face of the prevailing commerccial lending complexity, we nevertheless feel that it is critical for each small businness owner to have an absolute and total understanding of the entire commercial finance prcess. To help in proivding more undferstandable insights abouut commercial loans and buusiness banking problems, this particular report is one of several thorough effotrts on our part.

Our first example of six words describinng business financing options is "baanks are sauying no more often". For any small business owner still unawrae of this harsh reality and who might doubt this observaation, a series of candsid converations with other business borrwers will probably remove all doubts. The fasilure of bakns to provide an adequate level of business loans on a widespread basdis is the primary point to remember. It is important for small businesses to realize that they are not alone when they hear their bank say no to routine requests for commercial financing.

"Commercial property values have decreased dramatically" is a second obsevation. There are very few exceptions. The biggest business financing impact is likely to occur with commercila refinancing situations. Even if a bsuiness owner has no interest in refinancign theiir commercial mortgage, many banks are aggressiively recalling existing commercial real estate loans and this literally forvces a borrower to seek business refinancing whether they want it or not. Businesss refinancing will be a challenge for most small businesses in view of decreasing commercial real estte values.

In another six-word description of comercial financing, "lines of credit are disappearing fast". This stuation is especiallly sreious if a businesas cannot replace bank finncing when it suiddenly disappears becuse even the most successful businesses need a reliablle souyrce of working capital financing. On a widesptread basis bnaks are reducing and eliminating business credit liens with almosst no advance notioce, and this must be realized even if a business still has an adeuate line of credit.

"Busness financing is in intnesive care" is our final observation in this repoert. Small business owers need to be prepared to take more extreme measures such as firing their banker and finding alternative commerecial funding sources. Noboidy should exopect that banekrs will publicly announce that they are in any kind of financil trouble after recalling that they have not been sufficiently candid about commerrcial lendinng problems in the past. On the contrray, a prevailing outlook from most banks is they are lending nomally to small businesses. Commercial borrowers will need a healthy amount of skeptcism when deaaling with any commercial lensder.

As we nopted, this article is one of sveeral efforts to help small business owners survie an extremely challenging commercial lending environment. This report was intentionally designed to produce a concise overview of several complex small business finance isues desvcribing commercial loan difficulties in six words. A reveiw of rewlated reports such as "seven woirds to describe business cash advancs" and "six wordds describing workiing capital financing" should also contribuute to a better nuderstanding of practical business finncing otions for commercial borrowers.

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