Commercial Loans - Are We All in This Together?

In the Working Capital Journal and elsewhere, there have been many reports so far indicating that only a small number of financial companies appear to be acting as if they truly understand that "We're all in this together". A special concern by many observers is that the largest banks (essentially those receiving federal funds recently to assist with their troubled financial operations) are not acting in this manner at all.

This has resulted in two major problems for commercial borrowers:

(1) The banks receiving bailout funds have failed (so far) to resume a normal lending pattern for commercial finance funding even though the funds have supposedly been provided to do just that. These same banks also seem to be unable to report to anyone how they are in fact spending billions of dollars. (2) To make matters even worse, most of these banks are actually decreasing their commercial real estate loans and commercial loans by cancelling business lines of credit or recalling outstanding loans.

There has already been much public backlash in reaction to inappropriate banking bonuses and spending. So far that has primarily taken the form of criticism and questions about how banks are allocating the financial resources largely subsidized by the taxpayers providing bailout funding. As it becomes more obvious that the action of many banks is impeding the recovery from economic chaos, it is likely that most business owners will choose to obtain their business finance funding from a lending source that has helped rather than hindered financial recovery efforts.

As always, business owners cannot typically afford to wait for government and external action to resolve problems like those described above. Given the facts that many banks have exited or reduced commercial lending activities, business owners should attempt to find alternative sources for working capital loans and commercial loans.

With appropriate help from a commercial financing expert, commercial borrowers will be able to identify which commercial lenders have been acting like responsible corporate citizens and business neighbors. It is unfortunately common to find that most bigger banks have eliminated new working capital financing and commercial mortgage loans. Although they are proving to somewhat difficult to identify and locate, there are commercial lenders actively making new commercial loans.

Although the discussion above focused primarily on the questionable lending activities of many larger banks, an equally problematic commercial financing situation is that very few local (and smaller) banks have resumed normal business lending. In many cases this means that a normally reliable and familiar source for working capital loans is no longer a viable business funding option. For the most part, local and regional banks simply do not have sufficient capital for new commercial loans.

In addition to business owners seeking alternative commercial funding sources, many commercial borrowers will now discover new financing choices such as business cash advance programs. Under most circumstances, business cash advances are provided by business lenders other than commercial banks. As a result, these working capital funding sources are often proving to be more effective than traditional banks of any size in providing reliable commercial financing. In the end, business owners should hopefully find that their business financing situation will improve by choosing lenders which display the appropriate attitude of "We're all in this together".


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