Commercial Loans and Guerrilla Financing Tactics

“Focus on remedies, not faults.”

(Jack Nicklaus)

 An Introduction to Guerrilla Financing Methods for Commercial Loans

This article is a logical follow-up to earlier discussions which addressed how commercial lenders are sending mixed signals to small business owners about commercial loans and how bank rage is a growing factor throughout the business world. The discussion about guerrilla financing tactics provides several practical and effective methods which can be used by commercial borrowers directly or indirectly impacted by either mixed signals from banks or bank rage.

Designed as a short survival guide, this report is intended for business owners seeking small business loans. The need for adopting guerrilla loan methods has been made evident by the diminished performance of commercial banks in offering worthwhile financing programs for businesses. Although the suggested actions in this article might be seen as a last resort to be undertaken only when all else fails, in reality these suggestions should probably be considered by most commercial borrowers in the early stages of their commercial financing search due to the growing failure of banks to provide a normal level of business funding.

 Business Consulting as a First Line of Defense

“The best way to predict the future is to plan it.”

(Peter Drucker)

Simply put, the present commercial lending climate is not suited for newcomers who will have to cope with difficult finance programs targeted to small businesses as well as banks that are currently functioning irregularly. Business owners can overcome a sizable gap in information and knowledge by working with an expert professional in business consulting and commercial finance. Experienced business consultants can offer pragmatic solutions to overcoming small business loan problems that most commercial borrowers would prefer did not exist. Business finance consultants do charge a fee for their services, but a business owner will benefit greatly from this investment by avoiding financial messes that could do serious damage if professional guidance is not utilized.

 Determining Your Bank's Usefulness

“Banking establishments are more dangerous than standing armies.” 

(Thomas Jefferson)

The most practical gauge for defining whether a bank is good from a small business owner perspective will often be guided by whether essential commercial financing can be provided or not. There have been multiple reports indicating that banks have not been providing a normal level of commercial funding, although banks have been proclaiming otherwise. A consultant with experience in business finance will know in advance which lenders are actively making commercial mortgage loans and working capital loans. If a particular bank is in fact not providing commercial loans as usual, it certainly might be because they do not have sufficient resources to do so. While this bank might not feel they deserve the bad bank label, our perspective is that results count. On the only scorecard that matters to most commercial borrowers, the small number of good banks will gradually become obvious based on their healthy business lending habits. In the meantime, business owners should expect to need some professional help in finding these few remaining good banks.

 Be Ready To Get Rid Of Your Bank As Well As Your Banker

“We all leak oil, but the good ones control the flow.” 

(Lee Trevino)

For small business owners, the idea of firing their banker has perhaps not occurred to them yet. It may feel comforting to assume the bank actually cares how one's business is doing. Even when there is a close relationship with a commercial banker, in the current banking climate a guerrilla business loan perspective may be appropriate for small business owners who must look out for their best interests. In the commercial lending world, if a banker shows a pattern of being unable to achieve goals or offers initially discussed and agreed to, it may be a sign that the borrower needs to fire their banker.

 Merchant Cash Advance Programs for Working Capital Financing

“You miss 100 percent of the shots you don't take.” 

(Wayne Gretzky)

In order for small businesses to stay afloat in difficult times, utilization of guerrilla tactics means some options for small business finance that borrowers may have dismissed in the past due to being too complicated or costly may now need to be seriously considered. A merchant cash advance program (also referred to as credit card receivables factoring) is a key example of a commercial financing strategy which has frequently been a Plan B for many merchants but often not utilized in their final choice for acquiring more working capital. Utilizing credit cards to obtain working capital financing has become more attractive for the typical small business owner who requires additional cash for daily operations as business lines of credit have suddenly been reduced and commercial lenders have upped their collateral requirements.

 A Plan B Approach to Commercial Loans

“Always have a Plan B” 

(various sources, including the movie "Rare Birds")

For a successful business, a Plan B mentality should be helpful to many tasks and not just financial ones. For business owners impacted by commercial financing such as working capital loans and business mortgages, contingency plans are often overlooked. This lack of contingency plans might be because commercial borrowers assume (often wrongly) that there are not realistic alternatives to the commercial real estate loan or working capital financing they currently have.

"Rare Birds" is a movie which is surely one of the most effective and entertaining depictions of contingency plans. "Always have a Plan B" is included several times as a timely warning in this movie which stars William Hurt. The movie will provide an enlightening perspective for any business owner who doubts the importance of contingency plans. Here are two relevant business financing examples which illustrate why "Everyone should have a Plan B".

First, many local and regional banks are pulling the plug on business financing and business debt refinancing. When they do so, very little advance notice has been provided in most instances. Plan B financing should especially be developed for alternative business loans that might be needed if a business has commercial mortgages or commercial loans with a local or regional bank.

Second, many small businesses have commercial loans that contain recall provisions that permit the lender to review the loan each year. Using the recall terms, lenders can eliminate marginal loans while they continue business financing for others. If they do, the borrower will need to pay off the entire loan or refinance within a limited period of time. One of the most disturbing aspects of these features is that the borrower loses all control even though they might have been making payments on time. The best solution for avoiding this possibility is to review current business loans and explore Plan B refinancing options if recall terms are included.

 Additional Guerrilla Financing Tactics for a Small Business Survival Guide

“You may have to fight a battle more than once to win it.”

(Margaret Thatcher)

The intent of this discussion was to show that small business owners must do whatever is necessary to stay in business in a difficult business financing environment. In addition to the guerrilla financing tactics described above, there are several other important small business loan options which should be considered by commercial borrowers before finalizing their commercial loans, working capital financing or commercial mortgages.

 Where to Learn More

“Whatever you do in life, surround yourself with smart people who'll argue with you.”

(John Wooden)

For business owners seeking to learn more about any problems they are experiencing (or want to avoid) with small business loans and working capital financing, there are a limited number of resources which will describe practical business financing issues in more detail. Here is one such example of a small business finance resource which might be helpful — it is published by AEX Commercial Financing Group (owned and managed by Stephen Bush) and is available online at no cost:

• The Working Capital Journal — this resource provides analysis and advice about small business financing and working capital management.

 About the Author

Stephen Bush is the Founder and Chief Executive Officer of AEX Commercial Financing Group (based in Ohio). Steve is a graduate of Miami University (Oxford, Ohio) and obtained an MBA from the University of California, Los Angeles. He has worked with small business owners for over 25 years. Steve has also served as an officer in the U.S. Navy Supply Corps and as a business/government advisor. AEX provides commercial loans, small business consulting, commercial real estate loans, merchant cash advances and working capital financing throughout the United States.