Working Capital Business Loans – Think Outside the Bank

Traditional lenders providing competitive commercial financing for special purpose commercial real estate loans and business cash advances are becoming increasingly rare. “Thinking Outside the Bank” means that non-traditional (non-bank) lenders should be evaluated for commercial mortgage and working capital loan situations.

When commercial borrowers “Think Outside the Bank”, it is of critical importance that they are prepared to avoid a wide variety of problematic traditional as well as non-traditional commercial lenders in their search for viable business financing, especially when it involves business cash advance (credit card receivables and credit card factoring) programs, credit card processing services and commercial real estate financing.

Borrowers should realize that they have more commercial loan options than they think to take advantage of “Thinking Outside the Bank”. These business financing options are referred to here as “Thinking Outside the Bank” because most commercial borrowers believe that a bank is the best source for a commercial loan.

Here are two brief examples of how a commercial borrower is likely to benefit by “Thinking Outside the Bank”. In many situations, a traditional bank will provide a commercial mortgage but will include non-competitive covenants and terms. In other cases, a traditional bank will decline the business loan because they do not provide commercial financing to the commercial borrower’s particular type of business.

Some borrowers are likely to feel that a traditional bank is their best source for a commercial mortgage or commercial loan. However, because most traditional banks focus on a small number of established industries, non-traditional (non-bank) and non-local commercial lenders should be actively considered for most business financing situations. As discussed in this article, the suggested business loans strategy is “Thinking Outside the Bank”.

As described in a prior commercial loan report, in many business financing scenarios it is typical for a traditional bank to require more business loan covenants than would normally be seen in a competitive commercial mortgage situation. Traditional banks can, unfortunately, take advantage of a shortage of commercial lenders in their local market area.

An effective response by borrowers is to emphasize business financing options other than the traditional ones. It is not wise for business borrowers to depend only upon local and regional banks for commercial loan possibilities. For common commercial financing circumstances, a non-local business lender can frequently provide the best business loan terms because of competition with other business leaders.

There are three business loan scenarios in which borrowers will commonly discover that non-traditional lenders will offer terms that are better for the business owner: commercial real estate financing and SBA loan programs, working capital business loan programs, and business management programs for credit card processing.

Two of the worst commercial real estate financing problems for business owners can be eliminated by “Thinking Outside the Bank”. The first commercial mortgage business loan problem is the typical bank practice to eliminate most special-purpose business properties such as golf courses and funeral homes from their lending portfolio.

A second business loan possibility is the frequent practice of many commercial banks to add recall and balloon conditions to their commercial loans. The bank can then require an early payoff of the commercial real estate loan under stipulated conditions. The use of a non-traditional lender can prevent both of these commercial financing problems.

Most businesses accepting credit cards will be able to obtain a business cash advance with credit card financing. If a business needs to use credit card factoring, a traditional bank will typically be of little help.

Because even the most successful merchants usually need more financial resources than they can get from a conventional commercial business loan, it is essential for a business to “Think Outside the Bank” and find non-traditional lenders to coordinate this commercial financing requirement.

A credit card processing service can be a key function in improving the bottom line of merchants with high volume credit card activity. The analysis of credit card processing providers can be efficiently combined with credit card receivables and credit card financing.

In coordinating a business cash advance and working capital business loan program, it is usually possible to achieve improvements in the business owner’s credit card processing services. Traditional banks are usually not competitive in assisting with a business cash advance using credit card receivables. So it is likely that a non-traditional lender will be the major source of help with these complex business needs.