You cannot run any small business without incurring withstanding debts. Where the world is perfect, it would be easy to find all the expenses of your business on your own and even after that, have profits in your account. This is not at all the case of any small business owner. Credit cards, loans, as well as other important financial products are responsible for paying the day-to-day operating expenses as well as the expenses related to business expansions. Even when you research all your options before you are taking a loan, the situations are going to change with time and at one point in time, the situation that you are in can start overwhelming you.
You have to understand that the strategies that worked for a small business a few months ago are untenable now. You might have to make payments every month and every week. If this is the financial situation that you are in, one solution that can help in simplifying the loan payments and also yield terms, as well as lower payments, is debt consolidation.
What is business debt consolidation?
Refinancing and debt consolidation are two important terms, which are considered to be the same by many business owners. However, you need to know that consolidation is completely different from refinancing. Business debt consolidation loans are responsible for combining numerous payments into single loans. You do not have to worry about paying money to numerous lenders on different schedules. However, you have to make the payments to only one lender. As stated by www.forbes.com, debt consolidation is a simple way of getting out of excess debt.
For example, you might have to make a payment right at the beginning of every month, pay your lines of credit weekly and also clear the bill of your credit card at the end of the month. When you opt to consolidate them, you will have to combine all of these payments and pay the money only to one lender. With the help of debt consolidation, you can get low rates of interest, which will help in reducing the overall payment as well as the cost associated with borrowing. For instance, you might take numerous loans with high rates of interest because your credit score is low or there are other challenges within your business. If the situation that you were in earlier has improved, you are going to qualify for amazing rates as well as terms, and this is why you can receive the consolidation loan with low rates of interest.
On the other hand, if you decide to refinance your existing debt, you are not consolidating it. Indeed, debt refinancing is another option, and it involves receiving a loan at a low rate of interest to save money. However, you have to keep working with multiple lenders only but the benefits that you are going to receive will include a reduced rate of interest, longer terms of repayment, and lower fees.
Why should you consolidate your business debt?
If you are interested in controlling business debt, consolidation is one of the best options for you. However, as a business owner, you need to understand why you should consolidate your existing business debts. Given below is a list of the reasons as to why debt consolidation is going to be beneficial for your small business.
Improved terms of repayment
It has been observed that most of the businesses have payment schedules that are spread all over the month. If you are also one among them, you have the option of improving the terms of repayment when you decide to consolidate your business loans. Instead of having to clear money to every individual lender, you have to pay money to a single lender on a scheduled date.
You might also receive long terms of repayment. You might have a loan that has a term of 12 months. When you receive the consolidation loan, it will be responsible for covering this loan along with the other loans and your credit card debt. The term to repay a consolidation loan is 4 years, which gives you a lot of time to clear your short term loans as well as other additional debt amounts.
Reduced fees as well as the rates of interest
One amazing benefit of consolidating your business loans is that you can save more money because of low rates of interest as well as fees. If the credit situation that you are currently in has gone through massive changes since you received loans of high interest, you will get better rates of interest. When you consolidate your business loans to reduce the rate of interest as well as the fees associated, it can be immensely helpful, especially if you are buried in a lot of unwanted debt.
Improves the flow of cash
If you are capable of securing consolidation loans, which have the capability of lowering the cost associated with borrowing as well as the payments, you can contribute to improving the flow of cash within your business. You can invest the money that you save on your business and you can also use it for clearing the debt quickly.
Types of loans
Irrespective of whether you are unable to clear your debt or you are interested in receiving better terms and rates, it is suggested that you organize numerous payments into a single one so that you can clear your payments easily. This is why you should choose debt consolidation over other debt-relief options. To gain more knowledge about debt consolidation, you can visit NationaldebtRelief.com.
Bank loans- If your credit history is solid, you can turn to the traditional banks to receive a debt consolidation loan. However, you need to understand that it is not easy to qualify for a traditional bank loan. Even if you are qualifying, you are going to receive low rates of interest as well as long terms of repayment. To get a traditional bank loan, the credit score has to be above 700 and you need to be in the business for around 2 years.
SBA loans- The small business administration loans are considered to be ideal resources for getting long term and affordable business loans. SBA 7(a) loans can be used for numerous business purposes, which include, refinancing the debt or consolidating it. If you are not qualified enough to get a traditional bank loan, this is an option that you need to consider.
While handling all the aspects of your business, it can become difficult to remember the dates and tackle all the creditors that you have. When you consolidate your business debts, you will feel free because you only have to take care of a single payment as well as one due date every month.