Short term capital financing has become a difficult task for most commercial borrowers. For business owners facing this situation, it might appear that all is lost if their bank cannot help them. A business owner should waste no time in seeking effective new sources of commercial loan help if a banker is not capable of providing working capital.

Underlying the current difficulties for obtaining short term financing are at least five key factors impacting most business borrowers. Three of the factors are discussed below, and all of the issues are related to recent commercial lending chaos seen nationwide.

First, commercial credit lines (especially unsecured ones) are rarely available anymore. 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. A business owner will typically receive a minimal 30-day period (in some cases more) to make new financing arrangements by the bank reducing or eliminating a line of credit.

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.

Finally, many local and regional banks have exited business lending altogether. Whether they have publicly announced it or not, a significant number of banks operating nationally appear to have made a similar decision.

At least one of the three factors mentioned (or one of the two factors not discussed) has probably already impacted many small business owners. There are some positive developments which will help many businesses, recognizing that any business owner who has been or will be victimized by what could be viewed as unfair lending practices might not agree. 

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. Flexible new funding programs for short term working capital are among the most promising alternatives.

Because confusion can result for even the most experienced business owner, it will be prudent for borrowers to seek the counsel of a commercial finance expert who will speak candidly about the prospects for a business seeking short term working capital financing. Small business owners should seriously consider the more effective options for small business financing and working capital.