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Business Cash Advances and Contingency Planning

By: Stephen Bush

Contingency planning ("always have a Plan B") is likely to help small business owners avoid complex problems. But when it comes to commercial loans and commercial mortgages, working capital strategies often fail to include adequate attention to contingency plans and what can go wrong.

One of the most entertaining and effective depictions of contingency planning is a movie called "Rare Birds". This movie stars William Hurt and includes variations of the line, "Always have a Plan B". For any business owner who doubts the importance of contingency plans, the movie will provide an enlightening perspective.

The usefulness of a Plan B mentality is likely to be beneficial to many aspects of running a successful business. Contingency plans appears to be under-utilized when business owners seek new working capital funds via strategies such as commercial mortgages and business cash advances.

A major reason for this oversight is that many commercial borrowers probably assume that there are not effective alternatives to the business financing they are seeking. With this thinking, business owners might believe that it would not make sense to devote time to exploring a contingency finance plan. After watching the movie mentioned above, it will become much easier to understand at times like this that it is not a waste of time for businesses to "Always have a Plan B".

In this regard, Plan B contingency commercial financing should be viewed as insurance to protect a business owner in the event that something goes wrong with their working capital management. A few examples are provided below.

First, a surprising number of local and regional banks have recently decided to pull the plug on future business financing in their lending portfolio. When they do so, very little advance notice has been provided in most instances. If a business has commercial loans or commercial mortgages with a regional or local lender, a Plan B should be developed for the contingency that alternative business loan arrangements could be needed in the near future.

Second, many small businesses have commercial loans that contain recall provisions that permit the lender to review the loan each year. In this instance, the lender might continue a business financing role for some borrowers but will selectively eliminate what they consider to be marginal loans by exercising the recall clause. If they do, the borrower will need to pay off the entire loan or refinance within a limited period of time. The loss of control by the borrower even though they might have been making timely payments is perhaps the most disturbing aspect of recall features. The best solution for avoiding this possibility is to review current business loans and explore Plan B refinancing options if recall terms are included.

Third, many providers for business cash advances are notorious for making unrealistic promises regarding timing and payment terms. To prepare for this possibility, business owners should engage in thorough discussions with a prospective business financing advisor before proceeding. In this case the Plan B approach occurs prior to finance arrangements being finalized (unlike the first two examples in which financing was already in place).

Fourth, many lenders for commercial mortgages, business opportunity financing and SBA loans are equally guilty of over-promising and under-delivering. Local and regional lenders seem to produce a disproportionate number of problems like this. Similar to the recommended approach for business cash advances, commercial borrowers should pursue Plan B contingency financing. The ideal timing to discuss alternative commercial financing options is before committing to a specific lender.

Finally, for the four examples noted above as well as the numerous other possibilities where contingency planning is appropriate for commercial loans and working capital loans, we do have a closing thought. "Always have a Plan B".

Article Source: http://article-kingdom.co.uk

Learn how to avoid business cash advance problems and obtain candid business financing advice - Stephen Bush is a small business cash management expert => AEX Commercial Loans and Commercial Mortgage Loans

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