Short Term Capital Financing for Small Business Finance

Short term capital financing is proving to be one of the most difficult commercial finance needs for small business owners in the current financial environment. For most commercial borrowers facing this situation, it might appear that all is lost if their friendly banker cannot help them. In fact, learning that your local bank cannot provide short-term working capital should simply be the starting point for seeking alternative business finance sources.

There are at least three significant factors underlying the current difficulty for business borrowers attempting to obtain short term financing. All three factors are a direct result of the recent chaos seen throughout commercial lending nationwide.

First, unsecured lines of business credit have all but disappeared for many businesses. This is occurring throughout the United States and in most cases is due primarily to a bank decision to eliminate this kind of business financing rather than the payment history of the business owner. In a typical situation, the bank reducing or eliminating a commercial line of credit will provide the business owner with a 30 to 90-day period to make new financing arrangements.

Second, most banks are now requiring more collateral for all forms of commercial financing. The typical business in a depressed economy is certainly not likely to be able to provide more collateral since among other things, the value of their business and commercial property is likely to have decreased recently.

Third, many regional and local banks are exiting all (or most) commercial lending activities. In practical terms, a significant number of banks operating nationally appear to have made a similar decision (whether they have in fact announced it publicly is another matter).

Many small businesses have been impacted negatively by at least one of the factors noted above. Although any business owner who has been (or will be) victimized by what appears to be confusing and perhaps unfair lending practices, there are some positive developments which will help many businesses.

New business lending options are rapidly emerging to fill the large void left by commercial banks which have largely abandoned their previous commercial finance programs. The most promising of these are new and flexible approaches to short-term working capital loans.

Of course, the departure of traditional banks from many aspects of everyday business financing might not last, especially when such banks see new lenders establishing a foothold in what was previously almost a monopoly for them. In the midst of what will be confusing for even experienced business owners, it will be prudent for commercial borrowers to seek the counsel of a commercial loans expert who can speak candidly about the realistic prospects for a business seeking short-term financing.

Short-term Capital Financing
Small business loan programs and short-term working capital financing