To help small businesses and commercial property owners avoid problems, contingency plans ("always have a Plan B") are likely to be helpful. Business finance strategies often do not devote enough attention to contingency plans and what can go wrong with commercial financing and working capital loans.

One of the most entertaining and effective depictions of contingency planning is a movie called "Rare Birds". "Always have a Plan B" is included several times as a timely warning in this movie which stars William Hurt. The movie will provide an enlightening perspective for any business owner who doubts the importance of contingency plans.

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 small business financing and commercial mortgages.

Unfortunately many commercial borrowers probably (wrongly) assume that there are not realistic alternatives to the commercial mortgage they need. In such a case, it might not make sense for a business owner to pursue contingency financing plans. Seeing the movie will help in reinforcing the importance of a Plan B.

Plan B contingency commercial financing can be evaluated like a form of insurance to protect a business owner in the event that something goes wrong with their existing financing. Here are two relevant examples.

First, a surprising number of local and regional banks have recently decided to pull the plug on future business financing in their lending portfolio. 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. The best solution for avoiding this possibility is to review current business loans and explore Plan B refinancing options if recall terms are included.

Here is some closing encouragement for the potential situations where contingency plans might be appropriate for working capital financing and commercial real estate financing. "Everyone should have a Plan B".