small business loan refinancing has become more relevant to small businesses which are trying to deal with reduced sales and cash flow~For small businesses trying to deal with reduced cash flow and sales, the process of working capital loan refinancing has become much more relevant~For a business owner faced with decreased sales and cash flow, the need to consider small business loan refinancing has become much more timely and critical}. In some situations business owners are being forced to refinance existing loans by current lenders, and in other cases they are attempting to secure additional cash. commercial funding and long-term commercial real estate loans~With both short-term commercial funding and long-term commercial real estate loans, refinancing difficulties are currently occurring~Difficulties for refinancing are now occurring frequently with short term business funding and long term commercial real estate loans}.

There are some business finance circumstances that will be harder to refinance. SBA financing and business opportunity loans are two scenarios that are especially difficult to refinance. The need to replace existing business lines of credit with new financing arrangements is now emerging as equally difficult.

commercial real estate financing in which commercial property serves as collateral~The need to revise commercial real estate loans in which commercial property serves as collateral is a more traditional example of refinancing~Revising commercial mortgage loans in which there is business property serving as collateral is a more traditional form of refinancing}. Because many banks have decided to stop making commercial loans, some borrowers will need to refinance simply to replace their existing commercial mortgage. Small business owners are being forced to explore refinancing options in order to get capital from their business equity to support their business financing needs in a slow economy. As borrowers are discovering, commercial refinancing is not as straightforward as it might have been in the past for either of these cases. In particular, there are two problem areas that will often be hard to overcome.

Business valuation is one factor acting as an obstacle to smooth refinancing. Declining sales levels lead to reduced commercial property values because commercial appraisals often derive business value from the income approach. A second key problem impacting business loan refinancing is the lack of recent business profits. Because some financial uncertainties have reduced sales for many businesses, a high number of merchants are showing losses on recent financial statements and tax returns. Because lenders look at cash flow to see if it is sufficient to cover debt payments, recent losses are likely to be a significant difficulty when attempting to refinance commercial mortgages and other commercial loans.

Whatever the specific financing situation for a small business, commercial borrowers should be better prepared if they approach the process with a realization that there might not be the usual obvious solutions to refinancing business loans. It is likely that most businesses will need to evaluate and consider both new commercial lending sources and new business financing programs before the end of their current efforts to refinance business debt.

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