Working Capital Loans and Commercial Finance Funding

As recently discussed in The Working Capital Journal, only a few commercial banks are currently offering traditional working capital loans. Small businesses needing this kind of commercial finance funding will increasingly need to consider other options for commercial loans.

Traditional working capital financing is currently available from a shrinking group of commercial lenders. Small business owners should determine which commercial banks are still actually providing this specialized commercial finance funding. As described in The Working Capital Journal, the most active business lenders are generally not among the small number of larger banks which have received bailout financing from the federal government.

In most cases the active commercial lenders for this specialized form of commercial funding are limiting working capital loans to businesses which are current in their debt payments and are showing a net profit (based on recent financial statements). New commercial loans can often be finalized to refinance lines of credit and term loans which have been cancelled or recalled by many lenders if these two requirements are met. There are alternative funding possibilities such as business cash advance programs for businesses not qualified for commercial financing using these two standards.

Many small business owners also rely on personal lines of credit to finance some of their business operations. There have been many reports of widespread cancellations and reductions of these lending programs as well, especially those involving lenders which have received a multi-billion dollar cash infusion from U.S. taxpayer money that was intended to facilitate the lending of money to businesses and consumers.

Personal and business lines of credit have been eliminated in many cases by lenders due to a reduced ability to pay by borrowers and deteriorating business conditions. However, as described in The Working Capital Journal, many borrowers had an excellent payment history for a high percentage of recent credit line cancellations or reductions.

Meanwhile, there are banks willing to make working capital loans. The best examples are banks which have not received federal bailout assistance. These business lenders have continued to provide working capital financing, both refinancing lines of credit and term loans which have been recalled or cancelled by other lenders as well as new business financing.

The pattern described above is very disturbing to most observers because it basically indicates that bailout funds have been given (so far) to lenders who primarily have a history of making bad loans (virtually all lenders receiving bailout funds to date). At this point, little attention has been given to lenders with a healthy balance sheet in federal attempts to get more funds into the hands of consumers and businesses.

Based on recent commercial lending activity, there are several notable conclusions.

(1) Businesses need to increasingly prepare for life without relying on a traditional bank line of credit and instead consider other viable sources of commercial financing such as business cash advances (which provide working capital based upon future credit card processing activity).

(2) The recent unwillingness by most lenders receiving bailout funds to report in any meaningful way how and where these funds have been used would certainly seem to be a loud and clear signal that these particular lenders are probably in worse shape than they are reporting to anyone.

(3) Future government assistance should be primarily restricted to banks and other lenders which have a history of making good loans rather than bad loans.

(4) Business owners should be willing to seek out commercial finance funding sources beyond their previous banking relationships when they encounter difficulties obtaining working capital loans and commercial loans from normally dependable lenders.

Can People with Bad Credit Really Get a Personal Loan?

Personal loans come in 2 different types: A secure loan, and an unsecured loan. The secured loan is one that requires collateral from the borrower, such as a house or car. If you have bad credit, you can still get a loan as long as you have something of value to offer as collateral. If you have bad credit and no collateral, it’s a bit harder to get a personal loan, but isn’t impossible.

As the economy is so desolate right now, a lot of financial institutions are offering bad credit loans. These are personal loans for people with no collateral and that also have a bad credit rating. They can be used to pay off debts, home construction, medical bills, vehicle repairs, or catching up on things you owe.

If you need a bad credit personal loan, you may want to try your bank or credit union first. Usually, these financial institutions don’t offer these types of loans. But it’s always good to start with the place you have built a relationship with.

Your next stop should be the Internet. When you start searching there, you’ll find that there are thousands of choices for you. Just by clicking your mouse you can get quotes, rates, and terms of numerous and varied loan types.

You do need to be careful, though, because all bad credit personal loans are different, just as the companies are that offer them. Searching for a lender online gives you the chance to thoroughly investigate each option before committing to just one. Be careful that you don’t run into a scam because there are many out there, not to mention the potential for identity theft. Verify everything about a lender before starting the process. Make sure there’s a valid physical address. Also, call the phone number and speak to a customer service representative. The Better Business Bureau will alert you to any complaints a company has filed against it.

If you have poor credit and no collateral, your interest rate will probably be pretty high. Your loan paperwork should clearly explain your fees and rate. Be clear about when your payments are due and read all fine print before signing anything.