Small Business Financing and the New Normal for Commercial Borrowers

It is appropriate to review what the "new normal" looks like so that small business owners will be prepared to cope with the challenges they now face with commercial lenders as a result of business financing options changing significantly during the past year or so. When such major changes occur with small business finance programs, commercial borrowers will need to accept the fact that a "new normal" way of doing things has emerged in order to be successful in obtaining new commercial financing.The dramatic reduction in the number of commercial lenders that are actively making small business loans is one of the most significant changes in the business finance lending environment. Banks continuing to insist that they are still providing small business financing when in reality they have reduced or eliminated their commercial lending programs is an equally important part of the "new normal".A recent report concluded that commercial lending activity fell by the biggest amount since records have been maintained. This problem seems likely to get worse before it gets better because based on Federal Deposit Insurance Corporation accounting, almost one out of every ten banks is close to collapse. Further concerns about bank finances are supported by Treasury Department reports indicating that more than 50 banks did not make November 2009 payments for Troubled Asset Relief Program loans made to the banks. The payments in question are due quarterly, and over ten banks have missed three consecutive installments. Unlike banks which have tripled and quadrupled interest rates for individual consumers missing a credit card payment, presumably the government regulators are simply hoping to get their money back from the delinquent banks.Banks have far too often conducted business as if they have a monopoly on their small business financing services. The rapidly growing realization that banks can be replaced when they no longer an adequate level of customer service has become an integral part of the "new normal" for small business owners.For most business borrowers the "new normal" will involve a new bank or at least a new commercial lender which might not be a bank at all as a direct result of the continuing shortcomings of banks in providing an adequate amount of small business financing help as noted above. While banks would like their small business owner customers to think that only a bank like them can help commercial borrowers, this is truly a hope started by the bankers themselves.For many essential commercial finance services such as commercial mortgage loans, numerous banks have indicated that they will no longer provide such financing anymore. For specialized business finance services such as working capital management, business consulting and business cash advances, banks only rarely provide a cost-effective and realistic option for commercial borrowers. For business owners which have commercial loans or working capital financing due to be refinanced within the next three years, planning ahead will be increasingly important to the success of their small business financing. With the "new normal", the timing for business borrowers is not likely to be as smooth for commercial refinancing once the bank decides to pull the plug on their small business finance services.