Refinance Business Debt

by Stephen Bush

Commercial Refinancing

For a business owner faced with decreased sales and cash flow, the need to consider commercial refinancing and working capital loan refinancing has become much more timely and critical. In some cases commercial borrowers are attempting to secure additional cash, and in other situations they are being forced to refinance an existing loan by the current lender. With both short-term business financing and long-term commercial real estate loans, business refinancing difficulties are currently occurring.

There are some business finance circumstances that will be harder to refinance. SBA financing and business opportunity loans are two scenarios in which it will be especially difficult to refinance business debt. A third example is now emerging as equally difficult, and this involves the need to replace an existing business line of credit with new financing arrangements.

The need to revise commercial mortgage loans in which commercial property serves as collateral is a more traditional example of commercial refinancing. Some borrowers are finding that they need to refinance business debt simply to replace their existing commercial mortgage because many banks have decided to stop making commercial loans. Due to a slow economic pace, a number of small business owners are exploring the possibility of business refinancing in order to get cash from existing equity to support their business financing needs. As borrowers are discovering, commercial refinancing is not as straightforward as it might have been in the past for either of these cases. Two specific problem areas will be particularly challenging.

One factor proving to be a business refinancing obstacle is business valuation. Declining sales levels lead to reduced commercial property values because commercial appraisals often derive business value from the income approach. The lack of recent profits for many businesses is another key problem impacting business loan refinancing. 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. Recent losses are likely to be a significant difficulty when attempting to refinance commercial loans and commercial mortgages because lenders want current cash flow to cover debt payments.

Borrowers should find themselves in better shape if they realize in advance that there might not be the usual choices for business refinancing. 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.

Business Refinancing