With business financing and working capital loans, commercial borrowers need to be prepared for a long and bumpy ride. Based on how chaotic the commercial banking climate is currently, this situation is expected to prevail for a long (but unpredictable) period of time. In spite of the frustrating and confusing business lending environment, a prudent commercial loans strategy is likely to produce the most effective results that can be hoped for by small business owners.
Finding appropriate commercial finance solutions will be an outcome that business borrowers will always hope for, but misinformation and insufficient information will play a somewhat unpredictable role in this process. The eventual success of commercial financing efforts will depend on an individualized and detailed assessment of the unique financial circumstances for a specific business, although it is appropriate to note that there are new and effective business loan options that will satisfactorily fill the commercial funding gap for many small business owners impacted by their current ineffective commercial bankers.
Anticipating the long and bumpy ride that lies ahead for even the most ordinary business financing request will be prudent and wise for small businesses. It has not been unusual for commercial borrowers to wait for one to two months before their bank finally declines to make a commercial loan that had appeared to be a mere formality when the lending process began, either because banks do not want to publicly admit that they are not presently making business loans or perhaps due to their somewhat secretive and changing guidelines for making such loans. Regardless of their prior description of “normal” for working capital management and commercial financing options, many business owners have already discovered how much and how quickly this has changed.
The rationale for describing the journey to business financing success as being both long and bumpy is based on a prevailing banking climate that is characterized by misinformation as well as insufficient information about current commercial finance options for small businesses. After they have finally been informed by their current bank that needed business finance help is not forthcoming, because they simply do not have enough information to successfully complete their task, a small business owner might be unsuccessful in their attempt to find a new source of commercial funding in one typical scenario involving insufficient information. When a commercial banker misleads a prospective business borrower by advising the business owner that the bank will be able to help in providing an unsecured working capital loan when the banker has already been told by senior bank officials that such financing will not be provided except for specific established business clients, this is an increasingly frequent misinformation scenario. Most banks are in fact eliminating or reducing working capital financing to small businesses as indicated by one public report after another.
More successful results should be produced by realistic expectations of what lies ahead in business financing efforts. Our purpose in describing current attempts to obtain small business loans as potentially being a long and bumpy ride is a sincere attempt to accurately portray the recent confusing and unpredictable state of commercial banking for small business owners.
Stephen Bush is a working capital financing expert who has worked with business owners for 30 years. AEX Commercial Financing Group provides business cash advances and small business financing programs
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