What You Need to Know About Business Debt Consolidation
If you have been in business for even a short time, you have likely realized that cash isn’t always a constant. Every business experiences cash flow gaps at some point. Sometimes you need cash to cover unexpected expenses, meet payroll or purchase new equipment. And opportunities have a way of popping up when you least expect them. Without cash on hand, those opportunities pass you by and the negative cash flow hole grows deeper.
So, you take out a few business loans. This likely involves different payments throughout the month, which also means different due dates, balances and interest – a lot to keep track of. If you’re like most business owners and wearing many different hats, you may want to look into business debt consolidation.
What is business debt consolidation, and how does it work?
Very similar to personal debt consolidation, business debt consolidation entails taking out a new loan to pay off your existing loans and debt. Essentially, you’re moving many different debts into one, streamlined monthly payment. The key, of course, is to find a loan that offers lower interest rates than what you’re currently paying. It also needs to cover all the outstanding debt you’re trying to consolidate.
Who does business debt consolidation work best for?
Business consolidation is usually recommended for business owners that are incredibly overwhelmed with paying multiple creditors various payments on a monthly basis. In short, business owners that find themselves in a vicious downward spiral of debt. Consolidating debt allows you to only have to worry about a single payment. This makes it much easier to budget expenses and reduce the likelihood of missed payments that affect your credit score.
Here are the three top benefits of debt consolidation:
- Better manage payments. You’ll be able to better track your payments, due dates, interest rates and overall finances.
- Improve cash flow. If you are able to secure a lower interest rate, you’ll see less money leaving your bank account every month.
- Boost credit score. When you are able to better manage payments due to one loan payment, you will also improve your payment history.
Here are a few of the cons of debt consolidation to keep in mind:
- No interest rate guarantee. If you are unable to secure a lower interest rate, it could involve paying more than what you currently owe.
- Increasing interest rate. If you’re not careful, you could end up paying more in total interest in the long-term by replacing old loans with a new one.
- Ongoing cash flow issues. If your business is experiencing serious cash flow issues, debt consolidation may not be the only financial issue that needs to be addressed to fix the problem.
The bottom line: make sure you consider all your options to make sure business debt consolidation is right for you. The key is to choose the option that helps your business short-term, while also safeguarding its long-term financial health.
Author Bio:- Michael Hollis is a Detroit native who has helped hundreds of business owners with their business debt consolidation solutions. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.