Is your business deep in debt? If so, you may be considering additional small business loans for debt consolidation. By now you probably have bad credit, too. I know this is a disheartening situation. You’ve worked so hard to grow your business. You have dreams! But your finances are a mess. Can you even hang on? Cash flow problems are a fact of life for most small businesses. When money is short, you borrow to pay your bills. You keep borrowing to stay afloat. Soon, your business credit cards are maxed out. If you have a business line of credit, that’s maxed out, too. So you turn to business loans with bad credit, accounts receivable factoring, or a merchant cash advance. It becomes a vicious circle. You have great intentions, but you can’t seem to get ahead of the debt.
So you’re still late making payments. If you’re overwhelmed with a tangle of business debt, no wonder you have bad credit. All of these small business loan resources you’ve tried can be great choices. But not if you keep piling them on. It’s time for a new plan. Consolidating your business loans can be the first step toward untangling. You can get on with managing your business. And get on a path toward better credit.
I noted in an earlier blog article that “business credit and small business loans go hand-in-hand. The better your credit profile, the more options you have. Options turn into opportunities to grow your business.” That’s what you want, isn’t it? So let’s get started.
Consolidating pulls together all your debts into a single small business loan. The money from this new loan pays off all your existing business loans, as long as they are unsecured. You’re left with just one payment, maybe even at a lower interest rate. You’ll have several years to repay. The longer repayment term helps reduce your monthly payment to something you can afford.
PROS & CONS OF DEBT CONSOLIDATION
Quickbooks notes, “While there’s nothing wrong with seeking financing to grow your business, failing to repay those debts could result in you losing the company you worked so hard to build. If you’re struggling with low profits and high costs, debt consolidation could be a viable alternative to defaulting on your loans.” Instead of managing multiple loan payments each month, you have just one. That saves time and paperwork.
Debt consolidation may seem like the obvious choice. But you should consider all the ramifications before you make this decision. For instance, having several years to repay can be an advantage. But as long as you’re committed to this payment, that money won’t be available for other business purposes. It could delay plans for upgrades or expansion.
FOLLOW THESE STEPS TO CONSOLIDATE YOUR BUSINESS LOANS
- Investigate alternatives to debt consolidation. The Small Business Debt Relief Guide reports, “Each year, thousands of American small business owners find themselves in desperate financial straits. Those who survive are able to do so by becoming slimmer and more frugal. In most cases, they also utilize one or more methods of small business debt relief.”
We’ll assume that belt-tightening is no longer working for you. A debt relief organization can work on your behalf to reduce what you owe. Or stretch out the payments. Doing this may help repair your bad credit. As a last resort, you could declare bankruptcy. But that’s exactly what you’re trying to avoid, isn’t it?
- Do your homework. There are a lot of debt consolidation companies out there. Not all of them have good reputations. Choosing to work with United Capital Source eliminates that risk. We have earned a sterling reputation, plus we’re an unbiased resource. Our entire business model is based on protecting your best business interests. We use our deep industry knowledge and understanding of your unique situation to match you with the best small business loan program. Best for you, that is. And we specialize in helping small businesses with bad credit.
- Do the math. You want to negotiate the best terms possible. A debt consolidation loan should lower your monthly cost. And it should help repair your bad credit. Look at interest rate and terms, but ask about fees, too. They will jack up the cost of your consolidation loan.
- Look for an unsecured type of loan. Putting up collateral might lower your interest rate, but it increases your risk. If your business cannot repay after all, you will lose those assets.
- Protect your business future by learning how to improve your cash flow. You have to be able to manage both incoming and outgoing cash flow. Small business owners that don’t master that often go out of business.
READY TO GET OUT OF DEBT?
It’s time to stop struggling and get control of your finances. Consolidating your business loans can help. But it’s not a cure. It’s a financial management strategy. All too often, small business owners backslide. The next thing they know, they’re back to square one – right where you are today. That’s why my point #5 above is critical. I know you want your small business to thrive.
Getting a debt consolidation loan can help start the credit repair process. But understand that your bad credit won’t disappear overnight. If you need another small business loan, you may have limited options. But at least you’ll be borrowing to grow. Not to keep from sinking under a mountain of debt.
Treat your debt consolidation loan like a precious gift. It’s your chance to get back on track financially so you can grow your business instead of fretting over money. Get smart about business credit. That way, in the future you’ll know when it’s right to borrow. And when it’s not. And you’ll know where to find the best small business loan program for you. With or without bad credit.