It was truly a good news mixed with bad news situation when
reviewing business finance developments that occurred
during 2007. Many of the commercial loan trends that
emerged last year have significant implications for
commercial borrowers seeking either new financing or
refinancing in the coming months.
For business cash advance and credit card processing
services, the past 12 months have been characterized by
significant changes. There were many providers both
entering and exiting these business activities. It is of
course good news that some ineffective providers were
forced to leave this specialized working capital management
service area. But the bad news is that there are still many
new and inexperienced companies attempting to operate in
this complex field.
A similar trend involving inexperience can be seen in
viewing the large number of residential financing brokers
now attempting to transition into business financing. Since
by some estimates approximately 100,000 residential
financing employees lost their jobs during 2007, there is a
real possibility that thousands of unqualified brokers will
be entering the business finance field during 2008 or have
already started the process.
During 2007 there was also noticeable attrition in SBA loan
providers. This is primarily a positive development, since
the field has long been overpopulated with inadequate
business lenders.
Likewise many local and regional banks visibly reduced or
eliminated their business financing activities during the
past 12 months. The bad news about this trend is that very
few former commercial lenders provided their borrowers with
adequate notification of their intent to exit the business.
If there is a positive aspect to this development it is
probably that many borrowers confronted with the need to
suddenly find alternative commercial financing sources have
often ended up with much better terms by dealing with a new
lender that specializes in commercial real estate financing
and working capital management.
A general business loan trend impacting refinancing is the
reduction in loan-to-value ratios, especially when
borrowers are attempting to get some of their equity out of
the business in cash. For purchase situations including
special purpose properties such as church financing,
slightly larger down payment requirements are increasingly
more common.
Although the general decrease in interest rates during the
past year is a positive development, there will probably be
some confusion among commercial borrowers who have
adjustable rate terms when they do not see their rates
reduced. In all likelihood, this will be due to a common
clause applied to most commercial loan contracts that
stipulate that the minimum rate for such agreements will
never be less than the initial rate. With such a floor rate
provision, this means that if a borrower starts with an
adjustable rate set at 10% and then rates fall, the
effective loan rate will remain at the initial rate.
A major commercial property investment trend has been some
increasing activity due to the current decline in viable
residential investing options. This seems to be
particularly true for business opportunity situations which
do not have a real estate component, an aspect of
increasing importance to investors who want avoid property
ownership at this time.
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Steve Bush is a commercial real estate investment loan
expert - learn how to avoid business finance mistakes and
find out about business opportunity loan strategies at AEX
Commercial Financing Group =>
http://aexcommercialfinancing.com
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