Businesses may have several lines of credit or loans out at any given time. While the goal is to generate enough cash flow not to have to worry about debt, this is rarely this case for new or early stage companies. Debt consolidation can save money by combining all of the debt into one single payment with a single interest rate. This is a form of refinancing, but different in the fact that the loan is entirely used to pay off existing debt.
Why Choose Debt Consolidation?
When a business has several small loans, it can be confusing and difficult to keep track of payments. Debt consolidation combines everything into one payment that’s usually lower than the total amount the company was paying in the first place. A consolidation loan has a longer repayment contract with a lower interest rate.
While consolidating your debt makes payments easier, the length of the loan means that borrowing the money can end up costing your more than your original debt over time. Look at all of your options, and work with a financial advisor to improve your spending habits.
Available Consolidation Options
There are several options to choose from when considering debt consolidation loans, including:
- Traditional bank loans
- Small Business Administration loans
- Online lenders
- Private lenders
The credit score, cash flow and length of time operating at a profit can all have an impact on the type of funding that your business will qualify for.
How to Prepare for Debt Consolidation
The first step involves totaling all of your current debt and deciding exactly what needs to be consolidated. Compare all of the interest rates of your existing loans and find the average rate from this. When choosing from lenders make sure that the debt consolidation loan has a lower interest rate than this number. Once you’ve settled on a lender you’ll agree to repayment terms and go from there.
If you still have questions or concerns about your business’s financial health, contact the experts at Steadfast Funding Partners. They can help you to understand and expand your funding options with trusted industry professionals.