There were both positive and negative developments for business financing during 2007. These will have an immediate impact on commercial loan strategies for borrowers.
It was truly a good news mixed with bad news situation when reviewing business finance developments that occurred during 2007. Many of the commercial loan trends that emerged last year have significant implications for commercial borrowers seeking either new financing or refinancing in the coming months.
For business cash advance and credit card processing services, the past 12 months have been characterized by significant changes. There were many providers both entering and exiting these business activities. The fact that many poor providers have been forced to stop their role in these complex working capital services is positive news for business owners. But the bad news is that there are still many new and inexperienced companies attempting to operate in this complex field.
A similar trend involving inexperience can be seen in viewing the large number of residential financing brokers now attempting to transition into business financing. Since by some estimates approximately 100,000 residential financing employees lost their jobs during 2007, there is a real possibility that thousands of unqualified brokers will be entering the business finance field during 2008 or have already started the process.
There was a visible reduction in SBA loan providers during the past few months. This is primarily a positive development, since the field has long been overpopulated with inadequate business lenders.
During the past 12 months a large number of regional and local banks eliminated or reduced their business financing services. The bad news about this trend is that very few former commercial lenders provided their borrowers with adequate notification of their intent to exit the business. The silver lining to this otherwise negative trend is that a surprising number of borrowers have obtained improved financing as a result of dealing with a new lender that truly specializes in working capital management and commercial real estate financing.
One trend that directly impacts refinancing and getting cash out during the refinance process is a general loan-to-value decrease by many lenders. Increased down payments are increasingly necessary to purchase special purpose properties such as churches and funeral homes.
Although the general decrease in interest rates during the past year is a positive development, there will probably be some confusion among commercial borrowers who have adjustable rate terms when they do not see their rates reduced. In all likelihood, this will be due to a common clause applied to most commercial loan contracts that stipulate that the minimum rate for such agreements will never be less than the initial rate. With such a floor rate provision, this means that if a borrower starts with an adjustable rate set at 10% and then rates fall, the effective loan rate will remain at the initial rate.
A major commercial property investment trend has been some increasing activity due to the current decline in viable residential investing options. Due to many investors who would rather avoid property ownership, the lack of real estate in business opportunity investing is an attractive aspect.
Failure to Communicate Within a Small Business
A failure to communicate can create havoc in several critical areas for small businesses. Three potential solutions include business training, negotiating and writing. Ironically these functions are also among the most likely to be severely impacted by a failure to use business communications strategies effectively in the first place.
Communication Strategies for Small Businesses
When individuals and businesses talk about communication, there can be many possibilities as to what they are including in the topic. While cell phones and tablet computers might be relevant to small business owners, the more actionable areas of interest are likely to include business proposals, negotiating and teamwork. Writing seems to have fallen into neutral territory as a strategy for communicating, and along with that the use of business proposal writing has also declined within many small businesses. Until companies discover more effective business development strategies, writing business proposals should be looked at closely.
Finance and Business Mistakes
Business and finance mistakes can be costly and cause other serious complications. While it can be helpful to learn from mistakes, it is also preferable to avoid such situations whenever possible.
