If you have multiple business loans, credit cards or cash advances making daily or weekly payments out of your bank account, you might be in a position to qualify for a debt consolidation loan. Getting one loan that pays off all your other debts, and gives you a single payment to make each month might lower your interest rates, which can save money in the long run. You also might be able to get a lower repayment term, which may give you more time to pay off your debts.
You can consolidate your business debts with a business debt consultation term loan, a commercial bridge loan or an SBA 7(a) loan. These are usually available to borrowers with good business credit and financial stability, but you should carefully consider your options before applying. You should know exactly what you hope to accomplish with a debt consolidation loan – do you want to reduce your rates, lower your monthly payments or both?
When you apply for a new business debt consolidation loan, you will have to provide detailed information about your business operations, current and historical financing and your overall financial health. This can be a time-consuming process. Before you start the application, it’s a good idea to get all your paperwork together, including copies of tax returns for the past two years, bank statements, key financial reports and your personal (and business) credit report. Having this documentation ready to go can help you speed up the application and approval process.
Once you have a list of all your existing debt, you should review each one for the amount owed, interest rate and repayment terms. This will allow you to compare your options and choose the best option. You should also understand that not every business debt consolidation loan will offer all three benefits: lower interest rates, affordable payments and a longer repayment term.
If you’re not sure whether or not a business debt consolidation loan is the right solution for your company, it might be worth considering other options, such as hiring an advisor to examine your current financing structure and operations and making changes. There are also free resources for small businesses available, such as SCORE and SBDCs, and accountants, attorneys and other consultants who can work with you to develop a debt management plan. Depending on the results of your consultation, you might be able to find ways to reduce your debt by paying down or selling assets, changing spending habits, increasing sales or both. If you haven’t already, it’s a good idea to set up regular meetings with your advisor to help you stay on track and manage your business debt.