To help commercial property owners and businesses avoid difficulties, contingency planning (“always have a Plan B”) should help. Business finance strategies often do not devote enough attention to contingency plans and what can go wrong with small business loans and working capital loans.

One of the most entertaining and effective depictions of contingency planning is a movie called “Rare Birds”. William Hurt is the star of this movie which includes several timely variations of the warning, “Always have a Plan B”. By watching the movie, an enlightening perspective will be provided to most business owners who might doubt the importance of contingency planning.

The usefulness of a Plan B mentality is likely to be beneficial to many aspects of running a successful business. For business owners impacted by commercial financing such as small business loan programs and business mortgages, contingency plans are often overlooked.

This lack of contingency plans might be because commercial borrowers wrongly assume that there are not realistic alternatives to the commercial mortgage they currently have. In such a case, it might not make sense for a business owner to pursue contingency financing plans. If you have seen the recommended movie, it will become second nature to realize at times like this that businesses should “Always have a Plan B” regardless of whether it seems to be a waste of time or not.

Plan B contingency commercial financing can be thought of as like insurance which will cover a business if their existing financing fails. Provided below are two examples.

First, many local and regional banks are pulling the plug on business financing and business debt refinancing. When they do so, very little advance notice has been provided in most instances. A Plan B should be developed for the contingency that alternative business loan arrangements could be needed if a business has commercial loans or commercial mortgages with a regional or local lender.

Second, lenders have added recall provisions to many loans that allow them to review the agreement annually (in most cases). Using the recall terms, lenders can eliminate marginal loans while they continue business financing for others. If they do, the borrower will need to pay off the entire loan or refinance within a limited period of time. One of the most disturbing aspects of these features is that the borrower loses all control even though they might have been making payments on time. If recall terms are included, a suggested solution for avoiding this possibility is to review current business loans and explore Plan B refinancing options.

Here is a closing thought for the numerous possibilities where contingency planning might be appropriate for commercial real estate financing and working capital financing. “There should always be a Plan B”.

In most locations commercial credit lines have been reduced or eliminated and less commercial real estate loans are being approved, while at the same time lenders have announced that business lending is back to normal. A direct result of this is confusion among business owners about the true availability of merchant cash advances and commercial real estate financing. Confusion about small business financing can have several outcomes for business owners. For any borrower impacted by mixed signals and confusion, the final decision will vary according to their specific situation. But among the difficult issues to be weighed in the decision-making process is likely to be whether it is feasible to find a new working capital financing source.

Due to mixed signals as well as other factors, many commercial borrowers are now reluctantly admitting that banks are just not what they used to be. It appears that most banks have lost public confidence just like many automobile manufacturers that are now a tarnished version of what they were just a few years ago. Such shifts by banks mean that business owners are facing a new small business loan climate and must adapt without much help from those banks. Because their business banker is just not be up to the task anymore, small business owners should not hesitate to admit that they must look out for their own best interests.

Even though this perspective can appear to be somewhat harsh, it is a candid and practical analysis of circumstances currently being faced by most business owners. Some of the same trauma that occurs when any positive relationship suddenly goes sour is likely to happen when unwinding a long-term relationship with a bank or banker. After doing the best that they can, all parties are then likely to move forward. As in any change-related decision, the decision-maker (in this case, the business owner agonizing over the firing of their bank) should openly evaluate the probable consequences of not changing at all. Most business owners will conclude that they should find a new bank if keeping the old bank is holding their business back, either by inadequate business financing or poor advice.

While businesses are still likely to feel the pressures of a confusing and complicated lending climate, it now seems like there is an ample supply of new commercial loan providers to fill the void left by many lenders stopping business lending activities. For most small business owners, what matters at the end of the day is having a reliable and effective commercial loan provider to support the operational requirements of their business.

To help small businesses and commercial property owners avoid problems, contingency plans (“always have a Plan B”) are likely to be helpful. But when it comes to working capital loans and commercial real estate financing, commercial finance strategies often fail to include adequate attention to contingency plans and what can go wrong.

“Rare Birds” is a movie which is surely one of the most effective and entertaining depictions of contingency plans. “Always have a Plan B” is included several times as a timely warning in this movie which stars William Hurt. By watching the movie, an enlightening perspective will be provided to most business owners who might doubt the importance of contingency planning.

For a successful business, a Plan B mentality should be helpful to many business operations and not just financial ones. For various reasons, however, contingency planning appears to be under-utilized when business owners are seeking new commercial financing such as working capital loans and commercial mortgages.

Unfortunately many commercial borrowers probably (wrongly) assume that there are not realistic alternatives to the commercial real estate loan they need. It might not make sense for a business owner to explore a contingency financing plan in such a case. Seeing the movie will help in reinforcing the importance of a Plan B.

Plan B contingency commercial financing can be thought of as like insurance which will cover a business if their existing financing fails. Two relevant examples are shown below.

First, an increasing number of regional and local banks are pulling the plug on business financing activities. When banks recall loans, they usually do so with little advance notice. 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, lenders have added recall provisions to many loans that allow them to review the agreement annually (in most cases). Lenders can selectively eliminate what they consider to be marginal loans by exercising the recall clause while they continue business financing for other borrowers. Within a limited period of time, the borrower will be required to refinance or payoff the entire loan if the lender exercises their recall provision. One of the most disturbing aspects of these features is that the borrower loses all control even though they might have been making payments on time. If recall terms are included, a suggested solution for avoiding this possibility is to review current business loans and explore Plan B refinancing options.

Here is a closing thought for the numerous possibilities where contingency planning might be appropriate for commercial real estate financing and working capital financing. “Always have a Plan B”.