Lenders to Avoid - Business Loan and Commercial Mortgage - By: Stephen Bush.., Posted on: 2007-08-14

Commercial mortgage borrowers should be prepared to avoid certain problematic commercial lenders unless alternative business loan options are impossible. One of the most serious commercial loan situations is a commercial lender that causes problems for their commercial borrowers on a repeating basis.

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.

Worthless Business Loan and Commercial Mortgage Pre-approvals

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 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.

Since this approach to pre-approvals frequently produces surprises for the commercial loan borrower, borrowers must be extremely wary of any commercial lenders that use this approach. There are several business lenders who provide this shortened and misleading version of a pre-approval within a few days of receiving initial applications.

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.

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.

Commercial Mortgage Loan - Yes or No?

I have published an article which discusses the tendency of many banks to say "yes" when they mean "no". Such banks will typically attach onerous business financing conditions to commercial loans instead of simply declining the loan. Business owners should explore other commercial mortgage alternatives before accepting commercial financing terms that put them at a competitive disadvantage.

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.

For many business lending scenarios, a non-local lender can probably provide better business loan terms because they are normally competing with other business lenders. It is not wise for borrowers to rely upon local banks for most business financing requirements.

Commercial Property Commercial Loan Appraisals

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.

Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.

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S.A. Bush provides unique advice for business loan - working capital and commercial real estate financing - church financing situations
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