Unusual Issues – Corporate Finance and Corporate Loan Assistance
This article provides an overview of several serious but relatively unknown issues in corporate finance and lending. Difficulties relate to commercial real estate investments, real estate loans, commercial cash situations and financial business opportunities.
The problems you can expect with a business loan are likely to be more severe and numerous than most business owners. Most business lenders will not be fully aware of a number of business finance issues. While not all problems apply to all loans, Potential challenges are related to business fundraising, business opportunities and commercial real estate financing.
Commercial Loan Advisory Reports –
We have published separate Commercial Loan Advice Reports that discuss in detail key issues that may arise in connection with typical commercial financing and commercial mortgage loan terms. For example, one report focuses on the general difficulties in financing investment in business opportunities. In another report, we looked at the hurdles we typically face when refinancing standby loans.
The Black Ice Analogy: The Invisible Problems in Corporate Finance.
The focus of this article is to highlight some of the more obscure issues of business loans. The corporate borrower should consider these controversial issues of corporate finance as very important. When ice is barely visible on the road surface, it is commonly referred to as black ice. Drivers who have been in this precarious state probably understand that invisible problems with corporate finances are just as dangerous for the company’s financial health.
Online Applications for Business Finance –
A relatively unknown early-stage funding challenge is related to the increased use of Internet technology by commercial lenders. Many business loan websites encourage borrowers to apply online. This is not the best way for a business owner to start financing their business.
It is important that entrepreneurs understand that it is not in their best interest to apply for business financing online. For a deeper understanding of why online business loan application is not recommended and how to find viable financing, borrowers should read the report titled How and Why to Avoid the Online Business Loan Application Trap.
Pruvisions Commercial Mortgage Cancellation –
The next obscure but serious business financing issue to look forward to is the lender’s use of loan repayment terms. Commercial loan amortization agreements mean that the lender can force the borrower to prepay the loan by terminating the loan before its normal expiration. Many traditional commercial lenders include repayment terms in their commercial mortgage terms, but this potential concern does not apply to all loans because some financing agreements do not allow for the possibility of a loan.
Circumstances that may result in a refund vary, but can generally include periodic review of financial statements, tax returns, and credit history by the lender. In the absence of specific income levels, credit scores, or other criteria, the lender will typically tell the business borrower that they must repay the loan within 30 to 90 days.
When paying off a business loan, borrowers must act immediately. Prudent lenders will exclude lenders that require exit agreements when evaluating business financing options. For commercial borrowers who have provisions in their existing commercial loan agreement, it would also be wise to consider pre-maturity commercial mortgage refinancing so that the refinancing occurs according to the schedule preferred by the business owner.
One-time payments and short-term business loans –
Another often overlooked corporate finance issue is the growing focus on short-term finance by many commercial lenders. What is the term of a long-term corporate loan? It is expected that, depending on the financial situation of an individual company, the preferred loan term will be from 10 to 30 years. Unfortunately, many commercial lenders often allow a maximum period of three years before a commercial mortgage falls due.
Under Globe’s repayment clause, the business owner is required to repay or refinance the balance of the loan. This type of loan is more of a short-term loan than a long-term business loan and should be avoided whenever possible. Long-term business financing is often a key differentiator that allows successful business investment, as new financing is not needed for many years and business loan payments are usually lower.
Commercial real estate loan consultants and lenders without experience –
A final example of a problem that is not obvious to most lenders is the lack of business loan experts available to give honest advice to business owners. In recent years, corporate finance and corporate investment have become increasingly specialized. Recent developments in real estate and business investing have made this process more difficult. The current turmoil in residential real estate investment has increased the number of residential real estate lenders and consultants looking to get into commercial lending.
This is an almost impossible turn of events for most lenders and advisors. There are more than 25 fundamental differences between investing in residential and commercial real estate. As a result, new and inexperienced corporate finance advisors often give their clients grossly inadequate advice and potentially catastrophic corporate finance.
How to avoid these and other problems with business financing –
What can professional drivers do to avoid a similar fate? For a deeper understanding of these and other intricacies of business financing, savvy entrepreneurs will turn to other resources. The Commercial Real Estate Lending and Investment Guide is an example of a corporate finance resource that offers strategies and solutions to many of the corporate lending challenges.