January 12, 2012 by bushaex
Small Business Finance Communications and Business Solutions
The possibility that small business owners might benefit from specialized small business finance communications help rarely jumps to the top of their action list when commercial borrowers are evaluating how to solve their current financial problems. The failure of small businesses to dedicate enough attention to areas such as business bank communication and commercial lender negotiating almost always ends up being a critical mistake that is eventually regretted. For a number of reasons, this avoidable and unfortunate scenario is being witnessed with even more frequency.
One major reason for small businesses not seeking small business communications help in a timely manner is related to their own internal limitations rather than the external complications involving banks and other commercial lenders. It is an unfortunate reality that small business owners frequently have an excessive number of important activities simultaneously competing for their attention. In the absence of more time or money (or both of these finite resources), some high priority action items will end up as unfinished or not even attempted.
A second reason for inaction is the increasing uncertainty and confusion that prevails throughout the small business finance lending community. Banks are simply not making commercial loans and business mortgages at a rate that will sustain normal working capital financing needs for small businesses. Banking failures are at a historically high level, and even more banks are defined as having serious operating deficiencies by the Federal Deposit Insurance Corporation. The biggest banks seem preoccupied by crisis management involving derivatives, foreclosures and exposure to several new risk areas because of their adventurous investment practices. Many lenders are devoting more financial resources to political lobbying activities than to commercial finance services.
Perhaps this is not so surprising after all because of the high profit margins that credit cards have generated for the bankers over a long period of time, and recent government legislation has finally reduced or eliminated some of the easy money for them. It is hard to sympathize with any bank complaints that refer to how difficult it will be to replace revenue sources like credit card processing which routinely gives them a rate of return between fifteen and thirty per cent. Most observers consider these lofty rates to qualify for predatory lending treatment, but the typical bank interpretation has so far been to look for other ways to replicate the quick and easy and immediately profitable revenue streams.
While it should be needless to say, it really must be said repeatedly until it is fully realized that small business financing does not meet an artificial commercial bank lending standard to produce a profit margin of over twenty per cent. In the absence of meeting this test, banks seem to have established a rainy day fund for themselves by reducing traditional lending activity and laying off thousands of their employees while simultaneously increasing executive compensation even though they continue to be scrutinized for acts of both omission and commission during the past several years. In the most recent outrageous example of banking institutions placing their interest well ahead of their customers, a financial holding company run by a former governor and senator has declared bankruptcy while simultaneously noting that over a billion dollars of client funds cannot be located.
The bleak picture portrayed so far in this discussion was previously described as avoidable. Despite the concerns and potential problems noted above, there are practical business solutions for small businesses interested in exploring their options further. The chaos which prevails in the world of commercial banks can be managed and facilitated by commercial bank consulting and commercial lender negotiating as well as business lender communications that fall outside of the need for specialized negotiating strategies. Internal business limitations can often be minimized sufficiently through the prudent use of small business finance consulting and small business communication consultants. However, even with successful use of external professional help, it is likely that any realistic solution will still involve a meaningful amount of effort and time by each small business owner.
Commercial Lender Negotiation Strategies
There is possibly no more prominent example of how small business negotiating strategies have been underutilized than the usual lack of genuine negotiation practices when most small businesses are working with lenders. This observation is not only applicable for recent circumstances but also when looking at the past forty to fifty years. What has made the situation more critical and actionable for small business owners is the chaotic economic climate that has resulted in a series of negative events for business banks and other lending sources. In short, a bad situation has been made worse because of complex factors such as reduced commercial property sales activity, decreasing real estate values and shrinking bank assets.
Whether analyzing small business finance communications in general or commercial lender negotiations in particular, any small business owner will probably readily admit that they would like to be able to devote more efforts to improving both management functions. However as any manager must do constantly, time and financial resources need to be juggled and allocated according to a wide variety of practical considerations. It is unfortunately not as simple as realizing that there is a problem. Instead the problems will need to be prioritized, and small business solutions will be implemented in accordance with the realistic priorities that prevail for each unique situation.
Prioritizing and managing tasks and problems is realistically the first order of business for developing successful negotiation strategies to deal with commercial lenders. For example, it can be relatively pointless to assign the top priority to negotiating a new working capital loan agreement with a bank (or other lending source) if that means other critical functions will be ignored for any substantial time period. When small business owners begin to reflect about the delicate balance that prevails within each of their time management scenarios as part of a candid assessment of what to do first (and what can wait until last) and how much time to devote to any given activity, it often helps them to realize that they might indeed need some external help to get through their particular set of obstacles.
The prioritization process can also help point small businesses in the right direction in the way that it generally illustrates just how unique management and financial problems are for each circumstance. The unmistakable and transferable lesson to be learned from that particular realization is that the most appropriate strategies for business lender negotiations will almost surely vary widely from one small business situation to another. This lack of a constant formula for commercial lender negotiating will make the path to practical communications solutions more challenging because the realistic small business negotiation strategies likely to be most successful in dealings with business lenders will need to be evaluated within the unique context of each borrower.
Small Business Communications Choices and Options
The harsh conditions currently prevailing in the world of commercial finance are sufficiently difficult that small businesses simply cannot afford to overlook any possible advantage available to them. Nevertheless that is exactly what is happening when a small business owner fails to thoroughly consider all of their business finance options. This scenario is often tied to a regular failure to utilize small business communications choices such as commercial lender negotiating and business lender communications.
While it might seem surprising that a borrower would intentionally overlook any reasonable business finance options, the practical reality for anyone currently owning a commercial enterprise is that both time and financial constraints often prevent them from doing what they really need to do in all too many circumstances. It is likely that many businesses have been accustomed to being less than perfect in attending to details such as timely negotiations regarding their working capital financing and commercial mortgage loans. In a friendlier banking climate than the one now facing all of us, this lack of perfection might go unnoticed. But the chaos which began impacting banks in 2008 (and much sooner than that in many cases) has probably changed the face of commercial lending forever.
Very few small business owners can run their commercial activities without at least some regular amount of external financing. For any borrower needing either a small or large amount of financial help to keep their business afloat, this critical need must therefore be treated as a high priority action item and not shoved aside casually as if it does not matter. The financial health and survival of the business literally depends on treating the situation with the utmost attention to detail in a timely manner.
Within this context of what is absolutely necessary to ensure that the business survives, it will suddenly become more clear that improved commercial lender communications can play a critical role in getting the job done. An increased focus on this as well as other aspects of small business communications can quickly make a difference. In order to reach this vital juncture, however, it will be essential for commercial borrowers to evaluate their options and choices and then proceed with timely action so that avoidable problems and risks do not come into play.
Stephen Bush is the Founder and Chief Executive Officer of AEX Commercial Financing Group (based in Ohio). He is a graduate of Miami University (Oxford, Ohio) and obtained an MBA from the University of California, Los Angeles. Steve has worked with small business owners for over 25 years. He has also served as an officer in the U.S. Navy Supply Corps and as a business/government advisor. AEX provides small business consulting and business finance communications help throughout the United States.