HOW DOES BANK FINANCING COMPARE TO PMCS FINANCING?
Bank financing may be useful in providing financing for short term debt such as accounts receivable and working capital. Most bank loans for long-term assets are mini-perms which means that the term may be five years with a longer amortization. At the end of the five year term, the bank may renew the loan (or maybe not renew it at all, based upon its own set of problems or other agendas). At a minimum, if it is renewed, the interest rate at that time may need to be renegotiated. In addition, there may be renewal fees and costs for new environmental reports, appraisals, etc. These five year balloons, as they are also called, may happen at the worst possible time, such as during an economic slow-down or a time of personal financial hardship. Therefore care should be taken in assuming a bank loan will always remain in place. Banks also typically require an ongoing debt coverage ratio minimum as well as minimum appraised values on real estate. Consequently, decreases in profitability or re
