Based on what has been seen and reported, it is reasonable to wonder if commercial banking has more big problems lurking in the wings. For the past year, most banks and lenders have been subject to both disastrous operating results and negative publicity. The commercial mortgage loans activity reported by most banks tells a different story than the portrayal as healthy and normal by bankers and politicians. While the banks have worked hard to solve their massive problems involving residential loans, the financial results have been questionable.

Unfortunately one problem will lead to another, as is common with complex circumstances. The failure to obtain normal business finance options will most likely lead to an increasing number of commercial loan defaults by small businesses. To avoid such negative consequences, prudent business owners should begin to take timely action now. The most serious small business finance problems can be anticipated and avoided with appropriate action.

Commercial lending to small businesses is already on life support based on a number of business financing statistics. Without government bailouts, commercial banking companies would have failed some time ago in many cases. As bad as that outlook is, this analysis will describe an even more negative perspective for small business finance options. Overall it currently appears that commercial loans and working capital loans represent the next big problem for banks and other lenders.

Several banking problems have resulted in significant negative publicity during the past year. These difficulties were largely related to the rising number of home foreclosures which in turn caused a ripple effect involving various investments tied to home loans. Such investments lost value so rapidly that they became known as toxic assets. The federal government provided bailouts to many banks to help them to keep operating when banks stopped making many loans that included small business financing. The banks have seemingly been hoarding these taxpayer-provided funds while most would argue that the bailouts were made with a specific understanding that normal lending would resume after receiving the funds. With this approach by the banks, commercial lending activities for small business finance services have been effectively downsized or eliminated.

Small business financing appears to already look like the next big problem based on commercial finance statistics recently released by many banks. In part this is due to the general decline in commercial real estate values during the past several years. This has resulted in some significant bankruptcies when many large commercial property owners were unable to either make their commercial mortgage payments or refinance debt (or both). The resulting bank losses are clearly having an impact now on commercial lending to small business owners even though these difficulties were primarily happening with large real estate owners and did not usually involve small businesses.

If recent events are any indication, the banks themselves will not be very forthcoming about problems with their commercial lending practices. Small business owners should have a candid conversation with a business finance expert to evaluate if their business might be exposed to the developing commercial banking difficulties. To best ensure that they obtain adequate small business loans for their business in the face of serious banking problems, a healthy amount of caution and skepticism is in order for commercial borrowers. For many small businesses, the most objective business financing expert is not likely to be their current banker.