Avoiding malpractice with lenders and brokers for business loans is becoming more difficult as well as increasingly important. The time, cost and effort required to accomplish this will far outweigh the potentially devastating costs of ignoring the issue.
Malpractice in any activity typically occurs when there is a serious failure of professional duty. With borrowers seeking small business loans and commercial real estate financing, malpractice can occur with both commercial lenders and brokers for commercial loans.
During the opening segment of the television series Hill Street Blues, Sergeant Phil Esterhaus usually ended with a suggestion (let's be careful out there) that will also be helpful in avoiding malpractice situations involving working capital financing. Although that is a worthy goal, the actual practice of avoiding problems with business loans is somewhat difficult and complex. One of our most effective solutions for this dilemma has been to openly acknowledge that such difficulties exist and simultaneously provide detailed advice and strategies.
We have published a special report addressing one of the biggest recent causes of malpractice involving business financing and commercial real estate loans. Most commercial borrowers are probably aware that chaotic conditions started impacting residential real estate beginning about 12 months ago. Because their accustomed level of residential financing activities have all but disappeared, former residential brokers and lenders are in many cases now executing business loans. As you might imagine, this can result in problems for commercial borrowers.
Inexperience involving commercial loans is never a good thing when you are describing a commercial lender or broker. In almost all cases the complexity of business loans combined with inexperience by their financing advisors can result in a formula for malpractice.
Even though a broker or lender was superb at executing residential mortgage financing, please do not assume that they will also be good (or even marginally capable) when it comes to commercial mortgages, working capital financing or small business loans. We have prepared a series of reports which focus on over twenty critical differences between residential financing and business financing. In reality it takes years to master commercial loans.
Another common source of malpractice with working capital financing is currently seen with many agents for business cash advance programs. Most of these agents represent only providers for credit card receivables financing and simply do not understand business loans in general. They are focused on only the narrow but important service that they provide and are not capable of assisting with other forms of business financing.
Although it might not be obvious to most business owners, the malpractice potential with business cash advances is also directly related to the first example described above involving inexperienced brokers and lenders. Throughout the U.S. we have seen call centers switching from a focus on residential financing to merchant cash advances. Once again inexperience is never a good thing when complicated working capital management services are involved.
Specialized commercial real estate loans and SBA loans represent the final example of malpractice potential. Although many commercial lenders seem to suggest that they can do SBA financing, in reality very few do what they claim. One major business financing lender ceased most business operations during the past year because of apparently fraudulent SBA loan activities.
Specialized commercial property such as funeral homes, gas stations, bowling alleys and golf courses have always been recognized as problematic for commercial loans. For example, one prominent provider of funeral home financing is the subject of multiple lawsuits regarding their irresponsible commercial funding activities.
Commercial borrowers should rightfully conclude that an important step in avoiding potential malpractice circumstances might simply be to avoid certain lenders and brokers. We would agree wholeheartedly, and in fact published a special report some time ago dealing with the need to avoid problem brokers and commercial lenders.
No matter how serious the three malpractice examples might be, they should be considered as the tip of the iceberg when looking at the overall obstacles for working capital loans and business loans. Our advice is meant to reinforce the importance and value of being prudent in pursuing commercial loans.
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.
