This report was made in a direct effort to provide more understandable insights into some of the most critical business finance issues affecting commercial borrowers. Our approach in this report is to describe current business loan ratios in six words. We have adopted a similar model in other commercial financial reports as seven words to describe commercial real estate loans. The Simplicity is Better. The perspective reflects the belief that after hearing an almost infinite number of commercial lending reports what small business owners really need is a more succinct explanation of these issues and the subsequent impact on their business financing options.
Before continuing it is important to emphasize that small financing options are often more complicated than expected by many corporate borrowers. We are definitely not trying to characterize corporate loans and working capital financing as either simple or simple. The fact is actually the opposite. The unfortunate reality that most business finance processes have always been too complicated and meaningful improvements are not on the way is one of our ongoing observations. However we consider it important for each small business to have an absolute and total understanding of the entire commercial finance process in the light of the prevailing commercial lending complexity. To help provide more understandable insights on commercial loans and business banking issues this report is one of several thorough efforts on our part.
Our first example of six words describing business financing options is banks do not say more often. For all small business owners who still do not know this hard reality and who can question this observation a series of sincere conversations with other business lenders will probably remove all doubts. Lack of banks to provide an adequate level of corporate loans on a widespread basis is the main 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 applications for commercial financing.
Commercial real estate values have fallen dramatically is a second observation. There are very few exceptions. The biggest business financing effect is likely to arise with commercial refinancing situations. Many banks are aggressively recalling existing commercial real estate loans and this forces a borrower literally to apply for corporate finance even if a business owner has no interest in refinancing its commercial mortgage. With reduced commercial real estate values corporate finance will be a challenge for most small businesses.
Credit lines disappear quickly is another six word description of commercial funding. Even the most successful companies need a reliable source of working capital financing so this situation is particularly serious if a company can not replace bank financing when it suddenly disappears. Even if a company still has sufficient credit it is important to realize that the banks largely reduce and eliminate credit credits with almost no notice.
As our final observation in this report enterprise financing in intensive care is. Extreme measures like firing the bank and finding alternative commercial sources of financing will in many cases be expected by small business owners. Banks have not been sufficiently sincere about commercial lending issues in the past and no one should expect that they will publicly announce that they are in some form of financial problems. On the contrary a prevailing outlook from most banks is that they usually lend to small businesses. When it comes to any commercial lender commercial borrowers will need a healthy amount of skepticism.
As noted this article is one of several efforts to help small business owners survive an extremely challenging commercial lending environment. This report has been deliberately designed to provide a brief overview of several complex small business issues by describing commercial loan issues in six words. A better understanding of practical business financing opportunities for commercial borrowers should also be realized by reviewing related reports such as six words describing working capital management and seven words to describe cash advances for merchants.