By Steve Bush

A brief series of pertinent small business financing questions and answers are provided below as a tool to illustrate why working capital loans and commercial mortgages have become so difficult to obtain. This is designed to serve as a good starting point for any small business borrower about to embark on efforts to secure commercial financing.

After they were given taxpayer funding by the financial bailout in 2008, are banks required to provide small business lending?

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. This seems like a term invented just for such an occasion. 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.


Are there really any good banks still standing? After the financial bailout, are banks still failing?

Yes seems to be an appropriate answer to both questions. Telling the difference between good and bad banks is unfortunately not an easy task for innocent bystanders. It should be apparent that there is still a lending crisis that was not resolved by the bailout because (among other objective indicators) there continue to be ongoing weekly reports from the Federal Deposit Insurance Corporation about bank failures. The rest of us can still draw our own conclusions even though bankers and politicians do not want to talk openly about this situation.

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. Because there were so many documented instances in which the phantom software never materialized beyond a press release, the practice was usually viewed as controversial. The world of small business lending has now apparently adopted this questionable public relations ploy.

While the preceding discussion was not intended to be a complete examination of small business loans, it was 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 above also illustrates several key issues to help explain the recent lack of adequate commercial real estate loans and working capital funding by banks to small businesses.

About the Author: Stephen Bush has provided business financing expert advice to commercial borrowers for over 30 years and delivers small business finance services throughout the United States. Please visit the Commercial Mortgage Loans website for AEX Commercial Financing Group at


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