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More Problems for Small Business Finance Programs
By Billy | March 15, 2010
It is only reasonable to determine if more big problems are lurking in the wings for commercial banking. Banks and other lenders have experienced both poor operating results and negative publicity for the past year or more. While both politicians and bankers would like to portray banks as healthy, the commercial mortgages practices displayed by most banks tell a different story. While the banks have worked hard to solve their massive problems involving residential loans, the financial results have been questionable.
As with many complex situations, one problem will lead to another. The failure to obtain normal business financing will most likely lead to an increasing number of commercial loan defaults by small businesses. Prudent business owners should begin to take action now in a timely manner to avoid such negative consequences. With proper actions, the biggest small business finance problems can be anticipated and avoided.
Commercial lending to small businesses is already on life support based on a number of business financing statistics. In many cases, without government bailouts many commercial banks would have already failed. As bad as that perspective might sound, this report will provide an even more negative outlook for the future of small business finance programs. Unfortunately for banks and lenders, it does appear that working capital loans and business loans will be the next big problem.
Several banking problems have resulted in significant negative publicity during the past year. These difficulties were largely related to the rising number of home foreclosures which in turn caused a ripple effect involving various investments tied to home loans. 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. The banks have seemingly been hoarding these taxpayer-provided funds while most would argue that the bailouts were made with a specific understanding that normal lending would resume after receiving the funds. Commercial lending activities have all but abandoned small business finance needs by almost any objective standard.
Small business financing appears to already look like the next big problem based on commercial finance statistics recently released by many banks. The general decline in commercial real estate values during the past several years is a major factor in this conclusion. 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). While these difficulties were predominantly happening with large real estate companies and did not regularly involve small businesses, the resulting bank losses are clearly having an impact now on commercial lending to small business owners.
If recent events are any indication, the banks themselves will not be very forthcoming about problems with their commercial lending practices. Even if they do nothing else, business owners should have a straightforward conversation with a small business finance expert to assess how exposed their business might be to the brewing commercial banking problems. 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. For many small businesses, the most objective business financing expert is not likely to be their current banker.
Topics: Real Estate Investing |
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