Small business debt consolidation can be immensely beneficial because of lower APRs, reduced monthly payment amounts and little or no negative impact on your credit score. To determine whether or not it is the best option for you, you need to review the terms of your current debt, your business’s overall financial health and your personal and business credit score.
This article focuses primarily on the benefits of taking out a small business consolidation loan.
Debt Consolidation: Reduced APRs (Annual Percentage Rates)
Among the main benefits of taking out a small business debt consolidation loan is the lowered interest rates compared to merchant cash advances and term business loans, for example. Short-term business loans with higher APRs are certainly appropriate in some situations, but they are not a sustainable long term solution.
Small business consolidation loans are offered at lower interest rates than almost all available options for short-term financing. Even though SBA loans often offer the lowest interest rate, the process of qualifying for these loans is complicated, with funds sometimes taking several months to become available.
Debt Consolidation: Reduced Monthly Payments
Small business consolidation loans usually come with monthly payments that are lower than the total payments previously made to multiple creditors. This lifts some of the burden off your business’s cash flow, freeing up revenue that can be directed to operating expenses, opportunities for expansion and savings that would help you avoid getting into too much debt in the future.
Debt Consolidation: Minimal to No Impact on Your Credit
Employing a business debt consolidation strategy opens up room for additional borrowing. This is because extended repayment terms and lower APRs all result in an improvement of your business’s debt-service coverage ratio (DSCR).
A well-established debt settlement company, such as nationaldebtrelief.com, can help you get additional financing when you take out a business debt consolidation loan. The additional financing is necessary because it eliminates the need to obtain additional short term business loans anytime soon.
Debt Consolidation: Improved Cash Flow Management
There are three ways in which a small business debt consolidation loan helps you improve your cash flow management. To begin with, it eliminates the stress of handling multiple accounts as you now need to deal with only one creditor.
Secondly, instead of having to monitor and adhere to multiple payment schedules (monthly, bi-monthly, weekly, etc.) and different payment dates, you only make one monthly payment. Third, extended repayment terms and a lower interest rate means the monthly payment you need to make is smaller, freeing up cash for other pertinent expenses.
Debt Consolidation: Opens Up Revolving Lines of Credit
Business credit cards and other revolving lines of credit are critical tools for cash flow management. They offer your business improved flexibility in expenditure because bills can be settled nearly interest-free provided the credit card bill is settled in full at the end of the month.
However, having outstanding balances on these lines of credit can lead to expensive interest payments and loss in flexibility. Business debt consolidation opens up your business’s credit lines because of more affordable monthly payments.