Reducing Commercial Debt and Small Business Bank Financing

Because of serious deficiencies with commercial banking services for small business owners, a prudent and logical response for business borrowers is to investigate the viable options for reducing their dependency on commercial debt and small business bank financing. A growing number of business owners are seeking business consulting advice about how to reduce commercial bank financing and small business debt.

In most cases, the commercial lending struggle with banks is not one openly sought by small business owners. The increasing inability of banks and other business lenders to provide adequate amounts of business loans and working capital financing has produced this practical outcome. In fact over the years most commercial borrowers have probably viewed their business banking relationships on a friendly and loyal basis. Massive changes are literally forcing small businesses to examine and revise their business financing strategies, much as seen with many other business practices.

Evaluating whether there are realistic alternatives to replace their current bank financing and commercial debt would be one possible outcome for business borrowers. Refinancing business debt with a new commercial lending source would be a normal and practical result. For one example, exploring business financing options to obtain working capital financing elsewhere would be smart for a small business with a commercial line of credit that is about to be eliminated or reduced (as is now happening on a widespread basis).

It will be wise to explore small business finance alternatives even in situations where business owners are not being forced to acquire a new source for their commercial loans immediately. Very little notice has been provided to impacted commercial borrowers in most recent examples of banks which have revoked existing small business loans.

Another effective business financing option is for small business owners to analyze whether it is feasible to permanently reduce commercial debt and small business bank financing. A focus on reducing overall business debt rather than merely finding a new home for small business loans would be the result of commercial borrowers pursuing this approach. This strategy permanently decreases interest expenses for the business when executed successfully. It will probably also improve credit ratings for the business and the business owners, and this can improve interest rates on whatever amount of business financing might still be needed.

The strategy of permanently reducing business debt is one which is likely to grow in popularity for commercial borrowers. There is a noticeable trend among businesses as well as individuals to eliminate the services of companies which keep mistreating their customers. As reflected in a review of a wide variety of publications, such mistreatment unfortunately appears to be common with small business lending providers. Since this disturbing trend is especially evident among larger banks, one small business financing option that deserves to be thoroughly evaluated is whether it is feasible to simply find a better and friendlier (and more effective) commercial lender. To the extent that many small businesses find that they still need some bank financing, certainly it seems that a worthy goal would be ensure that they find a good (effective) bank to replace a bad (ineffective) bank.


------

Stephen Bush is a small business finance expert and has provided candid advice to business owners for more than 25 years. AEX Commercial Financing Group supplies small business financing and working capital management programs