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One of the most serious business financing 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. I have been advising business owners for many years, and I have encountered many commercial loan situations which have involved commercial lenders that I would not recommend as a result. This conclusion is typically based on an obvious pattern of lending abuses by select business financing providers. This commercial loan strategy overview will discuss the value of avoiding "problem business lenders", but we will not attempt to name specific commercial lenders to avoid. Key examples will be provided to explain why commercial borrowers should be prepared to avoid a number of commercial lenders when looking for successful business loan programs. Meaningless Pre-approvals for a Commercial Mortgage Business Loan Business borrowers often want an early pre-approval for their business loan. The apparent result of the preliminary business financing approval is that it will allow the borrower to make other business commitments which are dependent on the commercial mortgage being approved. An ethical commercial lender will treat any form of business financing approval very seriously. Commercial borrowers should expect that a meaningful version of such an approval will not be realistically possible in just two or three days. Nevertheless there are commercial lenders who provide their own special version of a pre-approval within just a few days of receiving preliminary application information. Because this abbreviated approach to pre-approvals almost always produces unexpected surprises for the commercial borrower as the business loan process goes forward, commercial borrowers need to be extremely wary of any commercial lenders that take this approach. Why should a lender use a questionable commercial loan pre-approval? Here are two primary possibilities. (1) To encourage the borrower to end their consideration of other commercial lenders. (2) To use a business financing pre-approval that is like a residential mortgage structure. Because many commercial loan situations are facilitated by residential mortgage brokers who are typically unfamiliar with normal business financing requirements, this reason will be especially relevant with business lenders that primarily work with residential mortgage brokerage firms. Such a lender should be avoided for most commercial mortgage circumstances. Misleading Yes or No Business Loan Situations I have previously published a report which describes the unfortunate practice of some regional and local banks to say "yes" when they mean "no". These banks will often impose excessive business loan requirements for commercial financing rather than reject the loan. Commercial borrowers should pursue other commercial loan choices rather than agreeing to business financing terms that are unacceptable. Thinking Outside the Bank for Business Financing 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 financing market. Such commercial lenders routinely take advantage of a relative lack of other commercial lenders in their local market. It is not necessary for borrowers to use only local banks for business loan needs. A wise strategy for business borrowers is to actively consider non-bank commercial mortgage alternatives. Commercial Appraisal Process and Business Financing Problems For commercial mortgage loans, commercial appraisals are an unavoidable part of the commercial loan underwriting process. The commercial appraisal process is lengthy and expensive, so avoiding commercial lenders which have displayed a pattern of problems and abuses in this area will benefit the commercial borrower by saving them both time and money. Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.
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About The Author Steve Bush provides candid church financing and business loan advice. Free series of AEX Credit Card Processing - Commercial Loan reports Click here to get your own unique version of this article.
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