Short Term Business Financing

Posted by allanmadams on October 5th, 2009 at 02:16pm

Short-term business financing has become difficult to obtain for commercial borrowers in most locations. It might look like all is lost if small business owners are faced with a funding situation in which their bank cannot help. Instead, learning that your banker is not up to the task of providing short-term working capital should simply be the starting point for seeking new and effective sources that are capable of providing sound business loan help.

There are at least five significant factors underlying the current difficulty for business borrowers attempting to obtain short term financing. Three of the factors are discussed below, and all of the issues are related to recent commercial lending chaos seen nationwide.

First, for many businesses unsecured lines of credit have been eliminated. This is occurring throughout the United States and in most cases is due primarily to a bank decision to eliminate this kind of business financing rather than the payment history of the business owner. In a typical situation, the bank reducing or eliminating a commercial line of credit will provide the business owner with a 30 to 90-day period to make new financing arrangements.

Second, requirements for additional collateral are now more common by most banks. Providing additional collateral in a depressed economy is not feasible for most businesses because there are likely to be reduced valuations for commercial property and many other business assets.

Third, many regional and local banks are exiting all (or most) commercial lending activities. Whether they have publicly announced it or not, a significant number of banks operating nationally appear to have made a similar decision.

At least one of the three factors mentioned (or one of the two factors not discussed) has probably already impacted many small business owners. There are some positive developments which will help many businesses, recognizing that any business owner who has been or will be victimized by what could be viewed as unfair lending practices might not agree. 

New business lending options are rapidly emerging to fill the large void left by commercial banks which have largely abandoned their previous commercial finance programs. Flexible new funding programs for short term working capital are among the most promising alternatives.

Because confusion can result for even the most experienced business owner, it will be prudent for borrowers to seek the counsel of a commercial financing expert who will speak candidly about the prospects for a business seeking short term working capital financing. Small business owners should seriously consider the more effective options for small business financing and working capital.

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