Are you struggling to manage multiple cash advance debts on your business and if you are finding it hard to manage business debts, then this article is for you. You can simplify your work and avoid all the headaches just by going for debt consolidation.
This article will provide you all the information that you need to have about debt consolidation. After reading this article, you would know what debt consolidation is, how you can consolidate business debt, about various options you have for debt consolidation, and the pros and cons of different options available for debt consolidation.
What Is Debt Consolidation?
Debt consolidation means getting a single loan to repay all other existing loans of your business. In this way, you can combine various serious loans into a new loan. Small business owners initially get a cash advance loan to expand their business. Still, due to increased interest rates and other seasonal fluctuations in profit, they have to go for more debts.
As a result, the business owners find themselves in many debts, each with its interest rates and terms. Handling multiple debts can be very frustrating as they have to keep track of various debts. It can also prove to be expensive and might result in a decrease in funds for the business, and the cycle of debts continues.
A smart move in such circumstances is to go for debt consolidation. As it is a single loan, it will make your work more straightforward and, in some cases, cheaper as well. You can choose a long-term loan to consolidate business debt to make it easier for you to pay.
Things You Should Know Before Consolidating Your Debt
Before you consolidate business debt, you should keep a few things in mind. You cannot use every kind of loan for debt consolidation. Some lenders might restrict debt consolidation from their debt. Before using the money for debt consolidation, make sure your lender knows that you intend to use it for consolidation.
Choose to work with a lender who has prior knowledge and experience of debt consolidation. He will also consider all the paperwork, including the confession of judgment you, as a borrower, will have to sign. It is a legal document which a business debt borrower has to sign. Signing the confession of judgment, the borrower waives the right to a trial.
Some of the lenders require higher credit scores of about 700 or above it. You might have to pay a down payment to some of the lenders out there for consolidation of your business debt.
How Does Debt Consolidation Work?
Here we will discuss the process of business debt consolidation in steps. The process is very straightforward, but it might not be easy for you.
- Analyzing Previous Debts:
Make a list of all the previous loans that you want to consolidate. This would give you an idea about the interest rates, the repayments, and the terms of all the debts.
- Determining The costs:
Calculate and check whether you can lower the overall interest rate. This would be possible if the total interest rate turns out to be more than 8 to 10 percent.
- Finding Debt Lender:
Find a suitable debt lender who has prior experience of debt consolidation and does not restrict you from using the money for the consolidation of your business debt.
- Verify The Efficiency:
Ensure that the terms of the loan are efficient for your business, and after you pay the debt, your business is not going in loss, and you can spend all other loans with that.
- Applying For The Loan:
Now, apply for the loan. Provide all the required documents and the ones which might help you qualify for the loan. This will support the confession of judgment.
- Paying Off Debts:
Finally, close the loan and use the loan payment to consolidate the previous loans. Now you can start making payments on your new loans.
Different Options For Debt Consolidation
These are some of the most common and easy options to get loans for debt consolidation.
- Loan From Bank
Most of the time, bank loans are the first choice. Commercial banks offer loans for business debt consolidation. It should be the first choice because the procedure is straightforward. The terms, underwritings, fees, interest rates, everything is very simple.
- Small Business Administration Loan
SBA loan is also a good option, and it is widespread as well. It offers access to lower than average rates. Other options require high credit scores, while small business administration loans do not need them. But it would help if you had a healthy business plan to qualify.
- Alternative Loan
These debts are comparatively very fast, and you get the amount within 24 hours of application. They are easy to get if you want a quick loan, but alternative loans can be expensive than other debts, so you should explore other options first.
- Personal Credit-Based Loans
The benefit of this option is that you do not need a business credit score or experience for it. Personal loans are based on your credit scores. The lender will underwrite the loan based on your finances, so you should have other sources of income along with your business.
- Business Line Of Credit
Using this option, you can get the payments by tapping whenever you need them. Its advantage is that you can get the loan once you have paid for the previous one. You can get access whenever you need it. The interest rates are usually around 2% or higher.
In this article, we have provided you with detailed information regarding debt consolidation, the method for it, and various options that are available for you to get the loan. You can easily choose the suitable one for your business requirements and simplify your life with debt consolidation. You do not have to worry about multiple loans and interest rates. So, apply today and make your life easy.