Six Words Describing Small Business Finance by Stephen Bush

The “simpler is better” perspective used in this article reflects a belief that a more concise explanation about commercial loan problems and the resulting impact on their business financing options might produce the biggest benefit for small business owners after hearing an almost endless number of reports about commercial lending difficulties. In several other commercial … Continue reading “Six Words Describing Small Business Finance by Stephen Bush”

The “simpler is better” perspective used in this article reflects a belief that a more concise explanation about commercial loan problems and the resulting impact on their business financing options might produce the biggest benefit for small business owners after hearing an almost endless number of reports about commercial lending difficulties. In several other commercial finance reports such as “seven words to describe commercial mortgage loans”, we employed a similar strategy. This article was produced in a direct effort to provide more understandable insights about some of the most critical business finance circumstances effecting commercial borrowers, and the approach in this report is to describe current commercial financing issues in six words.

Small business finance options are often more complicated than anticipated by many business borrowers, and we want to emphasize this point before proceeding. We are definitely not attempting to characterize business loans and working capital financing as either straightforward or simple. In fact, quite the opposite is the case. Our ongoing observation is that most business financing processes have always been excessively complicated and that meaningful improvements are not on the way. In the face of the prevailing commercial lending complexity, we nevertheless feel that it is critical for each small business owner to have an absolute and total understanding of the entire commercial finance process. To help in providing more understandable insights about commercial loans and business banking problems, this particular report is one of several thorough efforts on our part.

“Banks are saying no more often” is our first example of six words describing business financing options. For any small business owner still unaware of this harsh reality and who might doubt this observation, a series of candid conversations with other business borrowers will probably remove all doubts. The primary point to remember is that banks are not currently providing an adequate level of business loans on a widespread basis. When they hear their bank say no to routine requests for commercial financing, it is important for small businesses to realize that they are not alone.

“Commercial property values have decreased dramatically” is a second observation. There are very few exceptions. The biggest business financing impact is likely to occur with commercial refinancing situations. Even if a business owner has no interest in refinancing their commercial mortgage, many banks are aggressively recalling existing commercial real estate loans and this literally forces a borrower to seek business refinancing whether they want it or not. With decreasing commercial real estate values, business refinancing will be a challenge for most small businesses.

“Lines of credit are disappearing fast” is another six-word description of commercial financing. Even the most successful businesses need a reliable source of working capital financing, so this situation is especially serious if a business cannot replace bank financing when it suddenly disappears. Even if a business still has an adequate line of credit, it is important to realize that on a widespread basis banks are reducing and eliminating business credit lines with almost no advance notice.

“Business financing is in intensive care” is our final observation in this report. Small business owners need to be prepared to take more extreme measures such as firing their banker and finding alternative commercial funding sources. Bankers have not been sufficiently candid about commercial lending problems in the past, and nobody should expect that they will publicly announce that they are in any kind of financial trouble. On the contrary, a prevailing outlook from most banks is they are lending normally to small businesses. Commercial borrowers will need a healthy amount of skepticism when dealing with any commercial lender.

As mentioned earlier, to help small business owners survive an extremely challenging commercial lending environment, this article is one of several efforts we have undertaken. This report was intentionally designed to produce a concise overview of several complex small business finance issues by describing commercial loan difficulties in six words. A better understanding of practical business financing options for commercial borrowers should also be realized by reviewing related reports such as “six words describing working capital management” and “seven words to describe merchant cash advances”.

Stephen Bush and AEX Commercial Financing Group provide business consulting help for small business finance programs and working capital loans:

Obtain Business Capital Using A Variety Of Commercial Finance Options

Commercial finance is one of the many options available to entrepreneurs seeking capital to start or grow an existing business. This sort of financing is also referred to as asset-based lending, meaning that it is a secured business loan. The borrower guarantees the loan by giving up business assets as collateral for the loan. Another popular phrase for commercial finance is asset-based finance.

Account receivable factoring is one form of commercial finance. This consists of selling open invoices for cash that can be used right away in the business. There are many benefits to this financing option including not giving up equity, being able to take advantage of early payment and volume discounts from your suppliers, you can actually purchase in greater volume from suppliers, and you also accrue no additional debt in your business.

Another popular commercial finance option is purchase order financing because it offers quick cash flow reserves. When any business is growing or expanding their business the cash flow simply isn’t there because of the money it takes to market and produce products. Suppliers also want to be paid with C.O.D. and your customers are on Net-30 terms; so you run into a cash flow problem. Purchase order financing solves this issue by paying for the costs of your goods directly to the supplier, thus giving you more cash to use on more critical business expenditures. To begin with purchase order financing simply obtain a purchase order from your customer, find an approved supplier, place the order through that supplier.

Asset based loans, an additional commercial finance option, provide a short term approach to maximizing cash flow within a business. This form of financing is used as test for a business to show how they would perform with a long term loan. The business who is receiving the asset based loan has a short window to prove that with the proper financing their business model is effective, and that a long term loan would ensure business growth over a long period of time. This form of financing is perfect for the business that can’t afford to wait to establish their business credit. The assets that are accepted as collateral for this type of loan include real property, accounts receivables, and completed inventory.

Other forms of commercial finance include bankruptcy reorganization, expansion financing, import and export financing, inventory loans, secured lines of credit, and merchant account advances. Financing a business is a difficult process, but if you utilize the financing resources available, your business have a much greater chance of success.

It is also good to work on establishing your business credit, ensuring that you separate your personal credit from your business credit. With good business credit scores obtaining large loans and other forms of capital is very simple, and you won’t be one of the 97 percent that actually have a loan application denied. One other strategy that is easy to do and beneficial on your quest for business capital is to use a free business capital search engine.Article Source: