Small Business Finance - Banking The next big problem?

For the past year, most banks and lending institutions have been subjected to two disastrous operating results and negative publicity. Effective lending reported by commercial banks conflict with the attempt by politicians and bankers usual to portray banks as healthy and normal. Most of the banks' financial results were disappointing after working so hard to solve the serious problems of residential mortgage loans. It is reasonable to ask whether commercial banking has more potential disasters that are about to emerge on the basis of what has been seen and reported to date.

Based on a series of statistical business financing, commercial loans to small firms is already alive. In many cases, without government bailouts many commercial banks have already failed. As bad as this prospect may seem, this report will provide an even more negative outlook for the future of small business financing programs. Unfortunately for the banks and lenders, it does appear that the lending business will be the next big problem.

During the past year or so, several banking problems have received considerable publicity. The difficulties were largely avoidable mostly about rising home foreclosures, which in turn caused other investments tied to home loans to fall in value. These investments lost value so quickly that became known as toxic assets. When banks stopped making loans to many (including the financing of small enterprises), the federal government provided funding rescue for many banks to allow them to continue operating. While most observers argue that the bailouts were done with the implicit understanding that bank loans would resume somewhat normal, the banks seem to be hoarding these taxpayers provided funds for a rainy day. By almost every objective point of view, lending business have all but abandoned the needs of small business financing.

Financing of small enterprises is already looking like the next big problem on the basis of statistics on trade finance recently by many banks. The general decline in commercial property values ​​in recent years is an important factor in this conclusion. Because many large commercial property owners could not make their mortgage loan payments business or commercial debt refinancing, this resulted in some bankruptcies significant. The resulting losses of the banks are clearly having an impact today on commercial loans for small business owners, even if these difficulties were mainly happens with the big landlords and not usually involve small businesses.

Bank losses on large commercial real estate loans have caused many banks to reduce or stop their small business financing, and this has obvious similarities to the previous situation of residential mortgage toxic assets causing banks to stop lending to normal Because of the scarcity of capital. The losses of the banks of large commercial real estate investors are having a ripple effect that caused the financing of small businesses to effectively disappear until further notice. While small business owners did not cause this problem, are suffering the immediate consequences when banks are unable or unwilling to provide normal levels of commercial financing them. This bad situation is made even worse when we learn that many banks are hoarding cash and approve a lesser number of commercial credits to allow them to quickly pay for bailout funds to the federal government. The main rationale for this approach is that it will allow banks to take excessive bonuses and compensation to their executives.

Unfortunately, a problem will lead to another, as is common with complex circumstances. The inability to obtain financing from normal activities, most likely lead to more and more suffering on commercial loans for small businesses. Prudent business owners should start acting now on a timely basis in order to avoid such negative consequences. The most serious financial problems a small business can be predicted and avoided with appropriate actions.

Even if nothing else, entrepreneurs should have a direct conversation with an expert in corporate finance small to assess how their businesses could be exposed to the problem commercial banks brewing. If recent events are any indication, the banks themselves will not be very forthcoming about problems with their commercial lending practices. For many small businesses, the most objective expert on business financing is not able to be their current banker. To increase the likelihood that they receive sufficient loans to small businesses facing funding problems in the course, a healthy dose of skepticism and caution will be useful for entrepreneurs.