Chapter 2Elusive Nature of Bank Funding

Perhaps the biggest misperception among the greater business community is how the banking sector views commercial lending and the associated risk of funding a small enterprise. And to be fair to small business owners, where did they learn to expect certain lending patterns? Perhaps it was from watching a movie like It’s a Wonderful Life or Wall Street?

Surely today’s commercial banker would fall somewhere in between the sappy hometown banker George Bailey (played by Jimmy Stewart) and the conniving hedge fund operator Gordon Gekko (played by Michael Douglas).

Realistically, the many varied impressions of what typical lending terms should be have more often been fed by reality. Many business owners can cite plenty of instances of aggressive lending provided intermittently by start-up banks, government guaranteed lending run amuck, or an occasional money-center bank buying market share in a particular lending niche.

And like the inner child in all of us, when the business market sees one behavior or response to market conditions, such as 90 percent or 100 percent loan-to-value (LTV) advances on commercial property loans, it expects those terms should be forever available to them, too. They can never know the myriad factors that may go into a credit decision, but are convinced that because they know someone who scored a highly leveraged, unsecured, and low-priced loan, they can find one, too.

Of course, they never consider that their friend ...

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