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It is only reasonable to determine if more big problems are lurking in the wings for commercial banking. For the past year, most banks and lenders have been subject to both disastrous operating results and negative publicity. The commercial mortgages activity reported by most banks tells a different story than the portrayal as healthy and normal by bankers and politicians. Most bank financial results have been disappointing after working hard to solve massive residential loan problems.

Unfortunately one problem will lead to another, as is common with complex circumstances. An increasing number of small business loan defaults will be the most likely result of failure to obtain normal business financing options. Prudent business owners should begin to take action now in a timely manner to avoid such negative consequences. The most serious small business finance problems can be anticipated and avoided with appropriate action.

Judging by numerous business financing measures, commercial lending is already a huge problem for most small businesses. Without government bailouts, commercial banking companies would have failed some time ago in many cases. As bad as that outlook is, this analysis will describe an even more negative perspective for small business finance options. Overall it currently appears that commercial loans and working capital financing represent the next big problem for banks and other lenders.

Several banking problems have resulted in significant negative publicity during the past year. The largely avoidable difficulties were primarily tied to increasing home foreclosures which in turn caused various investments tied to home loans to decrease in value. Such investments lost value so rapidly that they became known as toxic assets. When banks stopped making many loans (including small business financing), the federal government provided bailout funding to many banks to enable them to keep operating. While most observers would argue that the bailouts were made with the implicit understanding that bank lending would resume in some normal fashion, the banks seem to be hoarding these taxpayer-provided funds for a rainy day. By almost any objective standard, commercial lending activities have all but abandoned small business finance needs.

Small business financing appears to already look like the next big problem based on commercial finance statistics recently released by many banks. In part this is due to the general decline in commercial real estate values during the past several years. This has resulted in some significant bankruptcies when many large commercial property owners were unable to either make their commercial mortgage payments or refinance debt (or both). The resulting bank losses are clearly having an impact now on commercial lending to small business owners even though these difficulties were primarily happening with large real estate owners and did not usually involve small businesses.

Unfortunately we have already seen that the banks themselves are not likely to be forthcoming in a candid way about commercial lending problems. At a minimum, small business owners should have a candid discussion with a small business finance expert to determine how exposed their business might be to the developing problems with commercial banking. To best ensure that they obtain adequate small business loans for their business in the face of serious banking problems, a healthy amount of caution and skepticism is in order for commercial borrowers. Except in rare instances, the most objective business financing expert will probably not be the current banker for a small business.

Tags: business, business financing, commercial loans, consulting, finance, loans, small business, working capital

This entry was posted on Wednesday, March 3rd, 2010 at 8:36 am and is filed under documentation, mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.