How To Consolidate Your Small Business Loans


As any entrepreneur will know, borrowing money is virtually unavoidable when setting up and maintaining a business. By the time your business is a few feet off the ground, you will already owe a certain amount of debt, probably to several different lenders and at several different rates. At this point, managing debt becomes an important part of running the business, though owners will often allow this debt to snowball rather than manage it efficiently. When the debt repayments begin to outweigh the profit a business is making, bankruptcy is just around the corner. So, what can you do as a business owner to make this process easier and tackle such financial struggles before they spiral out of control?

“When the debt repayments begin to outweigh the profit a business is making, bankruptcy is just around the corner.”

As with personal and student loans, debt consolidation for small business loans is an important option to consider and an important tool in a budgeter’s belt. It can be an effective way to save money, taking a handful of different debts and rolling them up into one manageable amount. This new, single debt will have a single fixed rate applied to it, often at a significantly lower percentage than the total rate being paid on the old loans, effectively saving a considerable amount of money. Again, once the debt has been consolidated into one monthly payment, it becomes much easier to manage. The owner can go back to running their business rather than worrying about how to manage mounting debt.

How the Debt Consolidation Process Works

Small-Business-Credit-and-LoansDebt consolidation can be a short or lengthy process, depending on how you approach it. Upon hiring a debt consolidation company, accountants will be brought in to check the finance and assess the final health of the business. All of this takes time, but as a small business owner, there are many things you can do so as to prepare for this eventuality. When it then arrives, your preparation and readiness will make the process smoother and easier to traverse, minimizing the time you dedicate to it and maximizing the time you spend on your business. So, what can you do to prepare?

  • Begin by determining the debt in its entirety. Lay out your bills and create a spreadsheet so as to quantify everything you are currently paying. This should include outstanding balances, monthly payments and the rate associated with the debt owed to each lender.
  • Another thing you can do is to eliminate any debt that you are able to eliminate at the time. This may simply amount to the smallest outstanding balance. If you determine that you are able to repay this amount before hiring a debt consolidation company, then do so.
  • Shopping around for the best deal is advice that applies to many areas of finance, from taking out a loan to finding a repayment scheme. Talk to several different loan providers until you find a deal that best suits your current situation.
  • Debt consolidation is final, so perhaps the most important aspect of planning for consolidation is to ensure that debts do not continue to mount. It is useless to consolidate several debts into one payment, if you continue to borrow from different sources in the meantime.

The Benefits/Drawbacks of Debt Consolidation

While debt consolidation is an important option to consider, it may suit certain situations better than others. As with small business loans themselves, there are both benefits and drawbacks to debt consolidation. Given the final nature of consolidation, it is worth considering these advantages and disadvantages before taking the step:

  • Makes debt management much easier by combining several debts into one simple monthly payment.
  • Offers a single, fixed rate on the new debt rather than several (perhaps variable) rates, lowering the monthly payment and consequently the monthly cash outflow.
  • May reduce or eliminate negative attention such as non-payment notices from creditors and ex-creditors.
  • Some loans may be ineligible for consolidation, meaning that you may not be able to consolidate into a single monthly payment after all.
  • Consolidation is obviously a service that costs money; depending on your situation and how prepared you are, it may cost a lot in fees.

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