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The problems which need to be anticipated for a commercial are probably more serious and more numerous than most business owners expect. Most commercial borrowers will be totally unfamiliar with a number of the business financing issues. Although each problem will not be applicable to all loans, the potential difficulties will be relevant to business cash advance, business opportunity and commercial real estate investment property financing.

Commercial Advisory Reports -

We have published separate commercial advisory reports which provide a comprehensive discussion of the major problems likely to be encountered in typical business financing and commercial real estate circumstances. For example, one report focuses on common business opportunity investment financing difficulties. In another report, we discussed the obstacles usually experienced with SBA refinancing.

The Black Ice Analogy: Unseen Business Financing Problems -

The focus in this article is to highlight several of the more obscure commercial problems. A commercial borrower should consider such obscure business financing problems to be extremely important. When ice is virtually invisible on a road surface, this is usually referred to as black ice. Drivers who have experienced this hazardous condition are likely to realize that invisible business finance problems are equally dangerous for the financial health of a business.

Online Business Finance Applications -

The first relatively unknown business financing problem involves the increasing use of internet technology by commercial lenders. Commercial borrowers will be asked to submit online applications by numerous commercial websites. This is not a prudent way for a business owner to proceed with their commercial financing.

It is important that business owners understand that it is not in their best interest

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to submit an online business financing application. For a more detailed understanding of why an online commercial application is inadvisable and how to proceed in a search for viable financing, borrowers should review the report entitled How and Why to Avoid the Online Business Application Trap.

Recall Provisions for a Commercial Mortgage -

The next obscure but nevertheless serious business financing problem to anticipate involves the use of recall terms by a lender. Commercial recall covenants mean that the lender can force the borrower to repay early by calling the before it would normally expire. Many traditional commercial lenders routinely place recall clauses in their commercial mortgage conditions, but this potential concern is not applicable to all borrowers since some financing agreements will not allow a recall possibility.

The circumstances which can cause a recall will vary but can commonly include periodic lender review of financial statements, tax returns and credit history. If prescribed levels of income, credit scores or other benchmarks are not present, then the lender will typically notify the commercial borrower that they must pay off the within a 30-90 day period.

With a commercial recall, borrowers will need to refinance quickly. Prudent borrowers will exclude lenders that require recall agreements when evaluating business financing options. For commercial borrowers who have recall provisions in their current business agreement, it will be equally wise to consider refinancing their commercial mortgage before a recall occurs so that refinancing is accomplished according to the preferred timetable of the business owner.

Balloon Payments and Short-term Business Loans -

Another often overlooked commercial financing problem is the increasing emphasis on short-term financing by many commercial lenders. How long is a long-term commercial loan? Most business financing experts will advise a minimum period varying from 10 years to 30 years depending on the specific circumstances of the borrower. Unfortunately many business lenders often consider three years as the maximum period before a balloon payment will be due for a commercial mortgage.

A business borrower must either refinance or pay the balance if they are faced with a balloon payment term that is about to expire. This kind of is a short-term commercial instead of long-term and should be avoided whenever feasible. Longer-term business financing will often be the critical difference that facilitates a successful business investment because new financing will not be required for many years and business payments will usually be reduced.

Inexperienced Commercial Real Estate Lenders and Advisors -

The final example of a problem that is not obvious to most commercial borrowers involves a shortage of business experts providing candid advice to business owners. The process of business investing and business financing has become more specialized during the past few years. There have been some recent real estate and business investment developments that have made this process even more complicated. The current turmoil in residential real estate investment property has resulted in an increasing number of residential lenders and advisors attempting to become active in commercial activities.

This is an almost impossible transition for most residential lenders and advisors. There are over 25 critical differences between residential and commercial property investing. As a result, these new and inexperienced commercial financing advisors frequently provide woefully inadequate advice and potentially disastrous business financing for their clients.

How to Avoid These and Other Commercial Financing Problems -

What can commercial borrowers do to avoid a similar fate? A pragmatic approach is to explore additional resources that will facilitate a better understanding of complex business finance issues. The Commercial Real Estate Investment Property and Business Finance Guide is one example of business financing resources that will provide strategies and solutions for many problematic commercial circumstances.