One of the most serious business finance scenarios is a lender that causes difficulties for their commercial borrowers on a regular basis. It is specifically this kind of commercial lender which informed commercial borrowers should be prepared to avoid unless realistic alternative commercial mortgage business loan options are totally impractical.

As a direct result of my commercial loan experiences advising business owners for over 25 years and regular conversations with other business finance professionals, I do in fact believe that there are a number of commercial lenders that should be avoided. This conclusion is based on a recurring pattern of lending abuses by some business lenders.

This business finance strategy article will describe the importance of avoiding "problem commercial lenders". The article will not name specific lenders to avoid, but key examples will be provided to illustrate why prudent commercial borrowers should be prepared to avoid a wide variety of existing commercial lenders when seeking viable commercial mortgage and business financing strategies.

For a business loan based on commercial real estate value, commercial appraisals are an essential step in business loan underwriting. A commercial mortgage appraisal is typically expensive and lengthy. Bypassing problematic lenders which have exhibited a pattern of commercial appraisal abuses will help the borrower by saving them money, time and frustrations.

I published an earlier article which reported the questionable technique of many local and regional banks to say "yes" when they mean "no". When this happens, a bank will attach non-competitive commercial mortgage terms to business loans instead of refusing the loan. Business borrowers should explore other business financing options instead of accepting such unacceptable commercial loan terms.

An early commercial mortgage pre-approval is often sought by commercial borrowers. The expected advantage to this initial commercial loan approval is that the business borrower can make other business arrangements which are based on the business financing being completed.

An ethical business lender will view any business loan approval as a serious and binding action. Borrowers should not expect that a such a business finance approval is routinely possible in a day or two.

However, there are lenders who prepare a misleading and questionable version of a pre-approval shortly after receiving minimal application data. Because this approach often produces surprises for the borrower as the commercial mortgage process moves forward, borrowers should be wary of any lenders that do this.

Why do some commercial lenders provide such meaningless pre-approvals for a commercial mortgage? There are two likely reasons. (1) To motivate the commercial borrower to stop considering other potential commercial lenders. (2) To provide a business loan pre-approval that is similar to a structure prevalent with residential loans.

Due to the fact that numerous business loan processes are coordinated by residential mortgage brokers who are unfamiliar with typical commercial mortgage situations, this factor will be particularly pertinent when working with lenders that focus on business financing originated by less-experienced residential mortgage brokers. Such a misleading business lender should not even be considered for most commercial loan scenarios.

In smaller metropolitan markets, it is not unusual for a dominant commercial lender to impose harsher commercial loan terms than would typically be seen in a more competitive business finance market. Such commercial lenders routinely take advantage of a relative lack of other commercial lenders in their local market.

An appropriate response by commercial borrowers is to seek out non-bank commercial loan options. It is neither necessary nor wise for commercial borrowers to depend only upon local traditional banks for commercial mortgage solutions. For most business loan situations, a non-local and non-bank commercial lender is likely to provide improved business financing terms because they are accustomed to competing aggressively with other commercial lenders.

Subscribe to RSS headline updates from:
Powered by FeedBurner