Business Finance Quiz Questions and Answers

While the following discussion is not intended to be a complete examination of small business loans, it is designed to reveal potential lending difficulties to small business owners before it is too late to take appropriate action. The brief business financing quiz shown below illustrates one way to explain the recent lack of adequate commercial real estate loans and working capital funding by banks to small businesses.

Do phantom business loans refer to commercial financing that lenders say is available but in fact is not?

Yes, and the term is influenced by technology firms when they talked about products often called phantom software when they were trying to discourage customers from purchasing a competitive product even though the company that made the announcement did not have such an item actually available. The practice was always controversial because there were so many documented instances in which the phantom software never materialized beyond a press release. The world of small business lending has now apparently adopted this questionable public relations ploy.

Are there still good banks? Are banks still failing even after the financial bailout?

For both related questions, yes is an appropriate but qualified answer. Telling the difference between good and bad banks is unfortunately not an easy task for innocent bystanders. Because there continue to be ongoing weekly reports from the Federal Deposit Insurance Corporation about bank failures, it should be apparent that there is still a lending crisis that was not resolved by the bailout. The rest of us can still draw our own conclusions even though bankers and politicians do not want to talk openly about this situation.

Are banks required to provide small business lending after they were given taxpayer funding by the financial bailout two years ago?

No, although it is a mystery to almost everyone (except for the bankers themselves) that there were not such conditions placed upon the banks when they were saved from financial collapse by taxpayer funds. Because the assets are considered to be what is known as fungible, the recipients can effectively do what they want with the money. For this particular situation, the term seems to be perfect to describe the unusual outcome. As used for banking purposes it is not possible to say what happened to the money given to the banks because the monetary assets are interchangeable with other funds. Most banks saved from financial collapse now appear to be investing a significant portion in what most observers consider to be risky areas similar to what got them into trouble at the beginning of this crisis, and in any case there were no restrictive conditions which would require banks to provide any particular amount of commercial loans.

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Stephen Bush and AEX Commercial Financing Group are an expert source of commercial mortgage help - Steve has offered accounts receivable factoring and small business financing options for 25 years. Please visit the AEX website at aexllc.com

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