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All you have to do to keep your business running is conserve the desired cash flow. This is not an easy task and therefore you will have to follow the guide of a professional especially when your business has multiple loans at high interest and you want to consolidate these to repay.
The proceeds of the single debt consolidation loan will be enough to refinance all your existing debts and at the same time allow you to convert all your loan payments into one single and easy to follow repayment schedule. Apart from that, the small business consolidation loans will also offer a few other typical benefits such as:
- More ideal terms
- Less frequent payments
- Lower rates and much more.
However, you will need to focus diligently on the payment to make the loan work for you. If you are diligent it will make the entire effort more manageable and affordable as well.
The rudimentary facts
No project or effort can be successful without knowing the basics. Such knowledge will not only help you to move towards the set goal with more confidence but will also prevent and lacunas in the process as you will know the consequences of such mistakes.
Therefore, it is essential to start with the working process of the small business debt consolidation loans and then move deeper onto whether it is the best choice for you and from where you can get the best loan.
A business debt consolidation loan will typically work in the following ways:
- It will convert the multiple payments and accounts into a single loan product
- It will have a predictable and affordable interest rate and
- The payment schedule will be much easier to follow.
That means you will not have to constantly remember which loans is due on what day. You will have the payment ready on time to pay off your single creditor. This will help you to focus on other important areas of your business which will in turn help you to cover your costs and manage your business’s cash flow.
Comparing with refinancing
Sometimes business owners seem to mix up business debt consolidation and refinancing and use both the terms interchangeably. Though refinancing and debt consolidation are almost similar you will see when you look deeper into it or even read several debt consolidation reviews that both these are significantly different.
- Refinancing – This is the process when you takeout a new loan which is at a lower interest rate and use the proceeds to pay off a single and particular loan of higher rates.
- Debt consolidation – This is the process in which you can combine multiple high rate existing loans into one single payment.
That means all debt consolidations are a form of refinancing but all refinancing is not debt consolidation.
In addition to that, when you take on a debt consolidation loan it may not be necessarily offered at a lower interest rate. Since the primary objective of a business debt consolidation loan is to save you money by making payments more manageable by replacing multiple lenders with one creditor, you get a better interest rate.
Your debt consolidation options
Now that you know the basics of debt consolidation, you can realize why it is so imperative to be a smart borrower. It is essential that:
- You work with a reliable and reputable lender
- Do extensive research on your own and
- Check the calculations over and over again.
This will ensure that consolidating your business debts is the right decision for you. Typically, business consolidation loans can come in two forms namely secured and unsecured. You may also qualify for a long-term debt consolidation loan as well. However, as a rule of thumb, your option for a commercial debt consolidation loan will depend on a few factors such as:
- The current situation
- Your credit score
- The income of your business and
- The age of your business.
Depending on these factors and if they are favorable you can make your business debt consolidation loan choice from the following options:
Traditional Bank Loans:
This is the best way to consolidate and get rid of your debts provided you qualify for it. The loans have:
- The lowest interest rates
- The longest terms
- The largest amounts of capital lent.
All local community, as well as national banks, may offer such loans but be informed that they will do so only to the most qualified borrowers.
This is your next best option. An SBA 7(a) loan is the most popular of all that will allow you to get a loan up to $5 million. The Small Business Administration guarantee can help you qualify to get this from banks and other direct lenders who may have denied otherwise. The features of such loans are:
- The term length can be anywhere from 7 to 25 years
- The interest rates start at 6.75%.
However, like any other regular bank loans, you will need a strong credit and income to qualify for such loans.
You can also try out one of the several online money lenders that offer term loans. These loans can also serve as a business debt consolidation loan. The amount that you may receive can be as high as $350,000 which is enough to consolidate your debts and such lenders are worth trying. The features may include:
- The terms from 1 to 4 years
- The interest rates between 7.9% and 28.9% with
The best thing is that these loans have a provision for bi-monthly payment frequency.
Wrapping it up
As you can see that almost all sources provide such loans with their respective parameters and metrics to determine your eligibility. Therefore, you will not find any shortage of resources but until you follow their criteria of funding getting these loans can be difficult.
Moreover, when you do get an offer from any such sources, it is also important to make sure that you consider the timeframe of the loan and keep a provision or create a fund in your business finance management to make the payments on time till the end of it.
Featured image: Unsplash