When my company recently ran into debt, I was forced to do a double take on my financing options before saying, “Let’s move on” to my team. It is during the same time that I came to know about business refinancing. Business debt consolidation is what kept my business going even though the cash inflow was trickling and there were no significant breaks in sight. Debt consolidation is a breath of new life that any company needs to sail through tough times.
The overall idea of business loan consolidation is quite simple. The companies that are offering the said service will swap your current business debt for a more affordable one. Expensive debt is responsible the failure of over 93% of all unsuccessful firms in the US. Your situation will dictate the affordability of the loan terms. You need to be careful while making the switch.
Why should you think about refinancing?
In case your business is facing a similar financial crunch, you should think about debt consolidation and refinancing. Here are a few reasons why –
- Savings
The most obvious reason is to get a more affordable payment term and APR. This should also get you smaller monthly payments. Decreasing the overall payment rate will help you pay off your dues faster and start making more profit. Over time, the size of the payment will become negligible compared to the amount your business makes.
- Simplicity
Business debt consolidation is the simplest way to manage all business debt. You take all loans with different payment terms and different APRs and trade them in for a new loan with a more affordable rate. You will also be making one payment, on a fixed date instead of making several like you are doing right now. You will not have to worry about various creditors once you start paying off your consolidation loan amount.
- Safety
You should only approach lenders with a verified online profile. Be sure to check debt consolidation reviews before you commit to any of their terms. Signing up for debt management and consolidation will help improve your business cash flow. You can quickly focus on new projects instead of worrying about creditors and repossession of collaterals.
What are my options for seeking debt consolidation?
Debt consolidation is a serious affair. Before signing up for any services, you should read the fine print. Some sources offer business refinancing and consolidation service.
- Nonprofit debt consolidation company
The best option for you, if you have a decent credit score is to go for a non-profit debt consolidation loan. These offer the best APRs and repayment terms. However, they are also the most difficult to find. Once you find a non-profit loan agency, a whole shebang of paperwork and verification steps await you. They usually conduct a thorough background check, credit check and authenticate ownership before you can get your hands on the cash. The offers are lucrative, and acknowledgment can become competitive if you are an SMB looking for some quick financial booster.
- Your bank or credit union
You can also approach your bank or credit union for a debt consolidation loan. Banks have their policies for the authentication of an applicant. You might face trouble if your credit score is below 630. Most banks do a thorough credit check on all the candidates to see if they qualify for an unsecured loan. If your business is less than a year old, you can forget to get consolidation loans from registered banks. Consolidation loans from banks almost always bear higher APRs. These loans are unsecured and therefore carry more risk for the creditors. If you are looking towards taking a consolidation loan from your bank, be sure to compare the interest rates, repayment terms and allied factors from all possible sources.
- Business line of credit
This is a smart way to refinance your business. You can get direct access to cash from your business line of credit. You do not need to make any payments until you tap into to cash. The credit line can range between $2000 to $500,000, and the APR can range between 9% and 108%. This is steep for a business that is seeking debt consolidation. However, this is one of the fastest ways of getting hands on flexible cash for short-term business needs.
How can debt consolidation help my business?
Your debt consolidation loan should have the following qualities –
- It should be able to provide loans to creditors whose payments have been due
- It should be able to protect your business assets
- It should improve cash flow into your business
- It should remove the need to deal with multiple creditors and agencies
- You should be making smaller payments post-consolidation
Opting for business debt consolidation is a way of taking a step forward towards business profit. This should be able to address all financial issues of a small, medium or a large business. If your agency does not guarantee at least these advantages, you need to rethink about your debt consolidation options.
An ideal business consolidation loan is beneficial for the firm. Your consolidation terms should suit your business, and that is why you need to find a company that gives you custom terms that suit your needs.
Only about 20% of all business, which seeks a loan from a bank, get approval. If you are in dire need of cash, you should start at the first non-profit debt consolidation company you see. Check the customer reviews and ratings thoroughly. Check the business services on Yelp and then make your final decision. Debt consolidation rarely has a collateral, and your company should not ask your business title or your home equity as collateral as well.
Author Bio: Content curated by Mauneel Desai. He is a financial expert who has been advising some of the leading companies in the USA.
