Avoiding Commercial Finance Malpractice

Posted on September 28, 2009 @ 9:43 pm

The process of avoiding malpractice for small business financing has simultaneously become more important and difficult. Since ignoring the issue might result in devastating costs, any time and effort required to avoid such problems should be easy to justify. The possibility of commercial funding malpractice should be a serious concern when there appear to be shortcomings in carrying out normal professional duties. Malpractice can occur with both lenders and brokers for commercial mortgages and commercial loans when commercial borrowers are seeking business loans.

One of the biggest recent causes of malpractice involving commercial financing transactions is dealing with an inexperienced advisor. Starting a number of months ago, chaotic conditions began to impact residential real estate. Because numerous former residential lenders and brokers are now attempting to execute business loans after previous residential lending activities decreased, this has produced problems for commercial borrowers.

When describing a commercial lender or broker, inexperience involving business financing is never a good thing. 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 if they did a superb job with residential financing, it should not be assumed that a broker or lender wil be good at successfully completing commercial real estate loans. There are many significant differences between small business financing and residential financing. It usually requires years of effort to master the intricacies of commercial loans.

Agents for many business cash advance programs are another common source of malpractice with working capital financing. Typical agents might not understand business loans in general because they represent only providers for credit card factoring. All too often these advisors will be incapable of assisting with other small business financing services because they are focused on only their own specialized service.

Although it might not be obvious to most business owners, the malpractice potential with merchant cash advances is also directly related to the first example described above involving inexperienced brokers and lenders. In many cases call centers that previously focused on residential real estate loans have simply switched their focus to merchant financing programs. When complicated working capital management services are involved, inexperience is never a good thing.

When assessing potential obstacles for working capital loans and business loans, the malpractice examples described above are just the tip of the iceberg in most cases. The importance and value of being prudent in pursuing small business financing should be reinforced by this precautionary alert.

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