Avoiding Malpractice With Business Loans

When commercial borrowers are seeking commercial real estate loans and business loans, malpractice can occur with both business financing lenders and brokers. Malpractice in commercial funding activity is a concern when there is a serious failure of professional duty.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. This has produced problems for commercial borrowers since it has resulted in numerous former residential lenders and brokers now attempting to execute business loans because their previous residential lending activities have all but dried up.Inexperience involving commercial loans is never a good thing when you are describing a commercial lender or broker. In almost all cases the complexity of business loans combined with inexperience by their financing advisors can result in a formula for malpractice.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. In many cases throughout the United States, call centers that previously focused on residential real estate loans have simply switched their focus to merchant cash advance programs. Once again inexperience is never a good thing when complicated working capital management services are involved.Specialized commercial real estate loans and SBA loans represent the final example of malpractice potential. 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. As a relevant example, a national lender for funeral home loans is now the target of litigation due to commercial funding activities that almost anyone would view as irresponsible.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.

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