The commercial lending process has grown more challenging for small business owners, and business bank consulting might prove to be the most successful strategy for achieving commercial loan and working capital financing improvements. Selecting a business loan expert is easily the most important step in hiring a qualified commercial bank consultant. No matter how difficult it might seem, this task must be pursued until a business owner is satisfied.
Is your bank currently saying “Yes” to your funding requests? What if they say “No?” Here are three immediate tasks for small business owners interested in finding the “best” source of commercial financing:
- Evaluate non-bank lending sources
- Distinguish between good banks and bad banks
- Fire and replace an ineffective bank
The Importance of Non-bank Financing
It is essential to include non-bank sources in the overall evaluation of practical commercial loan options, so the selected small business finance expert must not only be familiar with banks but also equally capable of evaluating sources of non-bank financing (a financial strategy sometimes referred to as “Business Loans without Banks”). The business bank consultant will need to have a working knowledge of what distinguishes bad banks from good banks as well as the ability to identify effective non-bank sources that can provide small business financing services that are increasingly unavailable even from the good banks.
It should be noted that while it is likely that the thorough review of alternative business financing strategies might not be as urgent if an existing commercial bank is performing as needed by a business, there are still compelling reasons to consider other options in the event that something unexpected happens. For example, if their bank is classified as a bad bank, realistically it will be necessary for a small business owner to entertain the idea of firing their banker either sooner or later.
Searching for the Good Banks: The Need for Commercial Lending Experts
If it becomes necessary to replace a bank, it should be realized in advance that based upon specialized small business finance criteria, only a few banks can pass the stringent tests to be viewed as a good bank. If a small business is currently using what is deemed to be a bad bank but still needs an ongoing banking relationship, a vital part of commercial bank consulting will be the identification of at least one good bank candidate. Even though many financial experts will debate whether there are any good banks left standing, the search for them must realistically continue.
With the ongoing debate as to whether banks are really eliminating or reducing their small business financing services, fortunately there is plenty of data available to objectively confirm the sharp downward trend in working capital loans and commercial mortgages made by banks in recent months and years. But even when faced with public reporting of their actual loan activity, it is almost a sure thing that banks referred to as bad banks will have a conflicting view of the results. It does not help the position taken by banks (statements that they are lending at a normal level to small businesses) when commercial borrowers recall that during recent banking chaos banks were not the most reliable sources of information even when testifying before Congress.
Disagreements About Bank Lending Activity to Small Businesses
With widespread public reports indicating that small business financing has fallen to the lowest levels in many years, banks are simultaneously boasting about the supposedly robust level of their business loan activity. In one possible explanation for the disparity, banks might be offsetting a clear decrease in small business lending with an increase of commercial loans to large corporations.
Before completing any new financial agreements, borrowers should benefit by calling upon the business bank consultant to help them make a final call or to serve as a commercial finance expert providing them with a candid second opinion. This report is strongly encouraging small business owners to take aggressive action when determining which commercial real estate financing and working capital loan options are realistic for their business circumstances. Glaring differences such as those discussed above seem to make a compelling case for efforts to improve small business financing with the strategic use of commercial bank consulting.
What do you plan to do if your bank says no?