There are at least five significant factors underlying the current difficulty for business borrowers attempting to obtain short term financing. All five factors are a direct result of the recent chaos seen throughout commercial lending nationwide, and three of them are described below.
First, for many businesses unsecured lines of credit have been eliminated. Due to many banks deciding to eliminate this kind of business financing (rather than a lending decision that is based on the payment history of the business owner), this is occurring in many locations. In a typical situation, the bank reducing or eliminating a commercial line of credit will provide the business owner with a 30 to 90-day period to make new financing arrangements.
Second, bank requests for more commercial financing collateral are now a frequent occurrence. The typical business in a depressed economy is certainly not likely to be able to provide more collateral since among other things, the value of their business and commercial property is likely to have decreased recently.
Third, many regional and local banks have exited commercial lending. In practical terms, a significant number of banks operating nationally appear to have made a similar decision (whether they have in fact announced it publicly is another matter).
At least one of the three factors mentioned (or one of the two factors not discussed) has probably already impacted many small business owners. There are some positive developments which will help many businesses, recognizing that any business owner who has been or will be victimized by what could be viewed as unfair lending practices might not agree.
Although commercial banks have largely abandoned their previous commercial finance programs, new business lending options are rapidly emerging to fill the large void left by banks no longer active in this field. Flexible new funding programs for short term working capital are among the most promising alternatives.
In the midst of what will be confusing for even experienced business owners, it will be prudent for commercial borrowers to seek the counsel of a {business finance expert who can speak candidly about the realistic prospects for a business seeking short term working capital financing~Because confusion can result for even the most experienced business owner, it will be prudent for borrowers to seek the counsel of a commercial financing expert who will speak candidly about the prospects for a business seeking short term working capital financing~Seeking the counsel of a commercial financing expert who will offer a candid assessment of the realistic prospects for a business seeking short-term working capital financing is a prudent decision because confusion can result for even the most experienced business owner}. Small business owners should seriously consider the more effective options for small business financing and working capital.
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