Commercial borrowers are likely to be involved for some time to come in searching for help in understanding working capital financing in a changing economy. The traditional role of banks in providing small business loans appears to be growing smaller. Business owners are not easily finding a bank solution for their routine business finance needs. Evaluation of their commercial finance needs and finding new sources for commercial financing and working capital has become an essential task for borrowers. This report provides a series of brief explanations about some of the most critical commercial lending issues likely to be confronted by small businesses.

“Small business owners should have a Plan B” is a reflection of the realistic possibility that something will go wrong with a current business financing option, and business owners should do some advance planning to prepare for this. Contingency planning has always been a worthwhile task for a small business to employ for their management operations. It is strongly recommended that a variation of contingency planning also be adopted to help soften the blow if problems develop with existing business finance services. Businesses will frequently uncover financial improvements that they can make immediately by engaging in this forward-looking approach to working capital management and commercial mortgage loans.

An essential perspective for small business owners to have in the problematic loan climate displayed by most commercial lenders serving small businesses is “it is necessary to have realistic expectations”. The days of buying a business with very little down payment appear to be gone forever. The relative ease of getting working capital has been replaced by a less predictable borrowing climate for any form of working capital that is not secured by assets, and it is important to expect this lending situation. A much longer list of underwriting requirements that can realistically make attempts to refinance either difficult or impossible has produced a visible influence on refinancing commercial mortgage loans.

The unfortunate reality that bankers are just not what they used to be for most business finance situations is described by “banks are not the solution, they are the problem”. Hardly a week passes without negative reports about the poor financial health of banks. It was recently noted that there are now more problem banks (banks rated by the Federal Deposit Insurance Corporation as being more likely to fail) then anytime during the past two decades. Troubled banks have grown from about 300 in early 2009 to just under 800 in the early part of 2010. It is likely for commercial borrowers to have even more trouble getting water from a well that is running dry with financial data like this.

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