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Avoiding Malpractice with Business Loans

Malpractice in any activity typically occurs when there is a serious failure of professional duty. With borrowers seeking small business loans and commercial real estate financing, malpractice can occur with both commercial lenders and brokers for commercial loans.

During the opening segment of the television series Hill Street Blues, Sergeant Phil Esterhaus usually ended with a suggestion (let's be careful out there) that will also be helpful in avoiding malpractice situations involving working capital financing. Although that is a worthy goal, the actual practice of avoiding problems with business loans is somewhat difficult and complex. The most effective approach we have found for a dilemma like this is to offer comprehensive strategies and advice that reflect a candid analysis of these difficulties.

We have published a special report addressing one of the biggest recent causes of malpractice involving business financing and commercial real estate loans. Most commercial borrowers are probably aware that chaotic conditions started impacting residential real estate beginning about 12 months ago. Because their accustomed level of residential financing activities have all but disappeared, former residential brokers and lenders are in many cases now executing business loans. As you might imagine, this can result in problems for commercial borrowers.

Inexperience involving commercial loans is never a good thing when you are describing a commercial lender or broker. What borrowers need to be acutely aware of is that inexperience coupled with the complexity of business loans is likely to result in a recipe for malpractice in almost all cases.

Even though a broker or lender was superb at executing residential mortgage financing, please do not assume that they will also be good (or even marginally capable) when it comes to commercial mortgages, working capital financing or small business loans. We have prepared a series of reports which focus on over twenty critical differences between residential financing and business financing. It really does take several years to be effective in finalizing commercial loans.

Another common source of malpractice with working capital financing is currently seen with many agents for business cash advance programs. Most of these agents represent only providers for credit card receivables financing and simply do not understand business loans in general. They are focused on only the narrow but important service that they provide and are not capable of assisting with other forms of business financing.

Although it might not be obvious to most business owners, the malpractice potential with business cash advances is also directly related to the first example described above involving inexperienced brokers and lenders. Throughout the U.S. we have seen call centers switching from a focus on residential financing to merchant cash advances. Once again inexperience is never a good thing when complicated working capital management services are involved.

A final example of malpractice exposure involves SBA loans and specialized forms of commercial real estate loans. Although many commercial lenders seem to suggest that they can do SBA financing, in reality very few do what they claim. One major business financing lender ceased most business operations during the past year because of apparently fraudulent SBA loan activities.

Specialized commercial property such as funeral homes, gas stations, bowling alleys and golf courses have always been recognized as problematic for commercial loans. For example, one prominent provider of funeral home financing is the subject of multiple lawsuits regarding their irresponsible commercial funding activities.

Commercial borrowers should rightfully conclude that an important step in avoiding potential malpractice circumstances might simply be to avoid certain lenders and brokers. We would agree wholeheartedly, and in fact published a special report some time ago dealing with the need to avoid problem brokers and commercial lenders.

No matter how serious the three malpractice examples might be, they should be considered as the tip of the iceberg when looking at the overall obstacles for working capital loans and business loans. Our advice is meant to reinforce the importance and value of being prudent in pursuing commercial loans.

Article Source: http://www.newagelivingarticles.com

Steve Bush is a small business loans expert - learn how to avoid mistakes with commercial loans and find out about business cash management strategies at AEX Commercial Financing Group => www.working-capital-management.org

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