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.

The conclusions in this article are based on a regular pattern of lending abuses observed by advising businesses for an extended period of time. I have encountered numerous business loan situations which have involved commercial lenders that I would not recommend as a result. Based on these experiences and daily conversations with other commercial loan professionals, I strongly believe that there are quite a few business lenders to avoid.

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.

Meaningless Pre-approvals for a Commercial Mortgage Business Loan

Commercial borrowers frequently want a commercial lender to approve their commercial loan at the earliest possible point. The assumed benefit to this early commercial mortgage approval is that it will enable the commercial borrower to make other business plans which depend on the business loan being finalized.

An ethical business lender will view any business loan approval as a serious and binding action. Borrowers should not expect that a such an approval is routinely possible in a day or two.

However, there are lenders who prepare a misleading and questionable version of a pre-approval shortly after receiving minimal application data. Because this approach often produces surprises for the borrower as the commercial mortgage process moves forward, borrowers should be wary of any lenders that do this.

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.

Since many commercial mortgage loans are arranged by residential mortgage brokers who are frequently unfamiliar with common business loan procedures, this reason will be especially applicable when dealing with commercial lenders that specialize in dealing with residential mortgage brokers. This type of commercial lender should be avoided at all costs for most business financing situations.

Misleading Yes or No Business Loan Situations

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 some non-competitive business markets, it is unfortunately common for a lender to employ business loan terms that would typically not be seen in a more competitive commercial loan environment. Such business lenders can repeatedly take advantage of a non-competitive commercial lending imbalance.

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 commercial loan involving commercial real estate, commercial appraisals are a necessary part of the business financing underwriting. A commercial appraisal is usually costly and time-consuming. Eliminating business lenders which have known problems with commercial appraisals will help business borrowers to avoid frustrations as well as save money and time.

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

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