Business Financing

Most small business borrowers are understandably confused by all of the different interest rates for commercial loans. How does a small business borrower decide what is the “best” rate? Is it the lowest rate or is it more complicated than that? This article will discuss the “trade-offs” in making small business loan choices like this.

Commercial loan borrowers are likely to feel that a traditional bank is their best source for commercial financing. However, because most traditional banks focus on a small number of established industries and offer limited business financing services (which are typically the most profitable for them), non-traditional (non-bank) and non-local commercial lenders should be considered for most commercial loan situations. Therefore the recommended commercial loan strategy is to “Think Outside the Bank”. This approach is especially applicable for credit card loan (business cash advance) programs, commercial real estate loans and credit card processing services.

Retainer fees are “standard business practice” for some (but not all) commercial loan situations. It is understandable that a commercial borrower would rather not pay such a fee, so it is important for a commercial borrower to understand when it is more likely to be necessary. This article discusses when a retainer fee is appropriate for a business loan and how much a business borrower should expect to pay when a retainer fee is required.

Many banks are so conscious of their reputation in the local community that they don’t want to be known for refusing requests for commercial loans by respected community residents. One alternative that many of these banks have adopted is the art of never saying “no” in such commercial financing situations. What they do instead is to attach onerous conditions when they say “yes”. In most cases the bank doesn’t expect the commercial borrower to accept the conditions, and therefore the bank has avoided making the business loan without saying “no”. Two examples of a bank saying “yes” when they mean “no” are included.