One of the most serious business financing scenarios is a lender that causes difficulties for their commercial borrowers on a regular basis. It is specifically this kind of commercial lender which informed commercial borrowers should be prepared to avoid unless realistic alternative commercial mortgage business loan options are totally impractical.
As a direct result of my commercial loan experiences advising business owners for over 25 years and regular conversations with other business financing professionals, I do in fact believe that there are a number of commercial lenders that should be avoided. This conclusion is based on a recurring pattern of lending abuses by some business lenders.
This business loan strategy article will describe the importance of avoiding "problem commercial lenders". The article will not name specific lenders to avoid, but key examples will be provided to illustrate why prudent commercial borrowers should be prepared to avoid a wide variety of existing commercial lenders when seeking viable commercial mortgage and business financing strategies.
Ineffective Pre-approvals for Business Financing
Business borrowers often want an early pre-approval for their business loan. The apparent result of the preliminary business financing approval is that it will allow the borrower to make other business commitments which are dependent on the commercial mortgage being approved.
An ethical commercial lender will treat any form of business financing approval very seriously. Commercial borrowers should expect that a meaningful version of such an approval will not be realistically possible in just two or three days.
Nevertheless there are commercial lenders who provide their own special version of a pre-approval within just a few days of receiving preliminary application information. Because this abbreviated approach to pre-approvals almost always produces unexpected surprises for the commercial borrower as the business loan process goes forward, commercial borrowers need to be extremely wary of any commercial lenders that take this approach.
Why do several business lenders utilize misleading business loan pre-approvals? There are several motivations and here are two of them. (1) To employ a commercial mortgage pre-approval approach that is similar to a residential loan process. (2) To prompt the commercial borrower to stop considering other lenders.
Since many commercial mortgage loans are arranged by residential mortgage brokers who are frequently unfamiliar with common business loan procedures, this reason will be especially applicable when dealing with commercial lenders that specialize in dealing with residential mortgage brokers. This type of commercial lender should be avoided at all costs for most business financing situations.
Commercial Mortgage Loan - Yes or No?
I have published an article which discusses the tendency of many banks to say "yes" when they mean "no". Such banks will typically attach onerous business financing conditions to commercial loans instead of simply declining the loan. Business owners should explore other commercial mortgage alternatives before accepting commercial financing terms that put them at a competitive disadvantage.
Thinking Outside the Bank for Business Financing
It is not unusual for the leading business lender in some markets to use more restrictive commercial mortgage terms. Such lenders often take advantage of a lack of other local commercial lenders.
An appropriate response by commercial borrowers is to seek out non-bank commercial loan options. It is neither necessary nor wise for commercial borrowers to depend only upon local traditional banks for commercial mortgage solutions. For most business loan situations, a non-local and non-bank commercial lender is likely to provide improved business financing terms because they are accustomed to competing aggressively with other commercial lenders.
Commercial Mortgage Business Loan Appraisal Process
For a commercial loan involving commercial real estate, commercial appraisals are a necessary part of the business financing underwriting. A commercial appraisal is usually costly and time-consuming. Eliminating business lenders which have known problems with commercial appraisals will help business borrowers to avoid frustrations as well as save money and time.
Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.
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