Why Non-Bank Financing Works
July 18th, 2007 Filed Under Commercial Mortgages, General
It is important for small business owners to understand that they have more commercial loan choices available than they are likely to realize through ”Non-Traditional Lenders”. The average commercial borrower probably believes that a traditional bank is the best and only source for a business loan. Non-traditional commercial lenders are increasingly considered to have the competitive edge for a number of commercial financing scenarios.
How a commercial borrower is likely to benefit by using a non-bank lender.
- In many situations a traditional bank will provide a commercial mortgage but will include non-competitive or other restrictive covenants and terms; for example, requiring the business to do all their banking with the lender, many times with minimum balance requirements.
- In other cases a traditional bank will decline the business loan because they do not provide commercial financing to the commercial borrower’s particular business or property type.
Commercial borrowers might feel that a bank is their most likely source for business financing. However, since traditional banks usually focus on a few types of businesses, non-traditional business lenders should be emphasized for any business loan situation, such as special use properties or where the borrower is not willing to submit a full documentation loan application.
In many commercial mortgage situations it is common for a local bank to assess stricter commercial loan conditions than would typically be seen in a competitive business financing scenario. Banks will often often take advantage if there are few business lenders in their market.
An effective response by a samll business owner or commercial property investor is to take advantage of business financing options other than the traditional ones. It is not smart for business borrowers to depend only upon local banks for commercial loan source. For common commercial financing circumstances, a non-local business lender can frequently provide the best business loan terms because of competition with other business lenders.
There are at least three commercial loan situations where non-traditional lending sources can provide financing that the bank lender will not consider:
- stated income/stated asset commercial mortgage loan programs;
- accounts receivable factoring programs; and
- working capital financing on merchant accounts.
Two of the worst commercial mortgage problems for business owners can be eliminated by using a non-traditional lender.
- A typical bank practice is to eliminate most special purpose business properties (such as golf courses and funeral homes) from their lending portfolio.
- Commercial banks add recall and balloon conditions to their commercial loans. The bank can then require early payoff of the commercial mortgage loan under stipulated conditions. Both commercial financing situations can easily be prevented by a non-traditional lending source.
Thomson Capital Group specilizes in non-traditional financing solutions for small business. For more information about the advatages of non-traditional financing, give us a call at 215-489-9232 or go to our website at http://thomsonfunding.com
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