Recent commercial lender changes are likely to affect most small commerce, trade owners. whether a commercial borrower wants to continue their present banking relationship, they will find (in most cases) that the commerce, trade lending changes are permanent and cannot be avoided. A few unique and more flexible commercial lending sources represent a welcome exception to this trend.
One of the biggest commercial lending changes involves unique guidelines for working capital financing. Most banks appear to be quietly eliminating commerce, trade lines of credit or severely reducing the amount they are willing to finance to a level which is not helpful to an average commerce, trade. Very few businesses can survive without a dependable source of working capital, so this change promises to bag the highest precedence from most small businesses. To replace the disappearing commercial lines of credit, the most practical options for commerce, trade borrowers include working capital loans and merchant financing from one of the alternative commercial finance sources still active in small commerce, trade financing programs.
The difficulty of locating investment property financing illustrates another commerce, trade lender change. whether the commercial property is considered to be owner-occupied (the owner occupies a substantial portion of the building), more banks will be interested in making commercial real estate loans. Investors that enact not occupy the property often own commerce, trade properties like shopping centers and apartments. For many banks, it appears that they are currently restricting their commercial lending activities to those which qualify for SBA loans (Small commerce, trade Administration) which generally exclude investor-owned situations.
A third meaningful commerce, trade lending change is demonstrated by revised guidelines for refinancing commercial real estate loans. In nearly total cases, commercial lenders bear dramatically reduced the loan-to-value percentages that they will lend. In some areas and for specific types of businesses, many banks will no longer lend over half of the appraised value. While this causes difficulties when attempting to buy a commerce, trade, the problems for a commercial borrower reach a crisis magnitude when refinancing an existing commercial loan. In many cases the original commerce, trade loan was based on a much higher percentage of commerce, trade value than the bank is currently willing to supply. The lending problem is further compounded when a current appraisal reveals a decrease in value since the original loan was made. Due to a distressed economy which frequently results in decreased commerce, trade income that then leads to lower commercial property values, such an outcome is particularly common.
In a fourth example of commercial lending changes, for virtually total small commerce, trade finance programs many small commerce, trade owners bear already discovered an inflated fee structure from most banks. Perhaps the bank perspective for some of the commercial financing fee increases is that they need to find a revenue source to replace the diminishing income from small commerce, trade loans which has resulted from bank decisions to decrease commercial loan activity. When they encounter suddenly increased commerce, trade financing fees levied by their current bank, commerce, trade borrowers should seek different commercial funding sources apart from in unavoidable and unusual circumstances.
A final example of commercial lender changes is depicted by banks changing their overall guidelines for small commerce, trade financing. Many banks bear effectively stopped making any unique commercial loans to small businesses regardless of commerce, trade income or creditworthiness. Unfortunately these banks are not announcing publicly that they bear discontinued small commerce, trade finance activities. This means that while they might accept commerce, trade loan applications, they enact not intend to actually finalize commercial financing in most cases. Whenever it becomes obvious that the bank has no real intentions of making a requested working capital loan or commercial mortgage, this approach has clearly frustrated and enraged commerce, trade borrowers.
The five commercial lending changes described above are unfortunately the proverbial tip of the iceberg. As they approach commerce, trade lenders to obtain commercial real estate financing, working capital loans and small commerce, trade financing, commerce, trade owners will need to be particularly skeptical and diligent.