Business Entrepreneurship Personal Finance

Considering Top Business Debt Consolidation Options to Enhance Your Financial Health


By Isabella Rossellini

If you own a small or medium-size business, you may probably have different loans which you account for, and are liable to pay a lot in terms of interests as well.

Many at times, you may also feel that you are actually spending more unnecessarily in terms of loan repayments, and the accounting part of handling multiple loans may also be troublesome if you are a small business owner.

Those who are thinking of a way out of this loan chaos, debt consolidation may be an ideal alternative to think of.

Further we will discuss about the various aspects of business loan consolidation, but as a preface, you should know that this avenue has its own benefits and drawbacks, and you cannot consider debt consolidation as a complete remedy to get off your business debts.

What is debt consolidation?

Basically, debt consolidation is the process of taking up a single large loan in order to pay off all your smaller loans. In a way, this will help you to improve your financial health as you will owe to a single lender and the accounting part will also become much easier. This may give you room and peace of mind to focus more on business enhancement and returns.

With debt consolidation, it is also ideal to consider a lesser interest rate loan over a longer stretch of repayment period, which may further help lighten your financial burden. First, let us discuss the major advantages of debt consolidation.

q Lower interest rate

This is not a benefit that small businesses owners can easily ignore. By consolidating debts, you may be able to decrease the interest rates practically as you will have to pay interest for the total sum rather than a percentage of multiple loans. If you are a businessman facing trouble with multiple loan repayments, then not checking out this financial aid may be one big mistake.

q Lesser monthly payments

Less monthly payment is the top benefit of debt consolidation. As a small business owner, you need to focus on multiple business administration aspects at a time, and you have to keep track of a myriad of financial information when there’s multiple loans to manage. Consolidating loans can alleviate that workload with only a single payment to be made every month.

q Longer term

Getting a longer term to pay off your debts can be highly advantageous for small business owners who may not be able to bear a higher financial burden on a monthly basis with limited returns. However, you need to ensure the duration of repayment before signing up for a consolidation loan. Some agencies like the United States Small Business Administration may help you reap the best benefits by getting a longer repayment period such as 25 years or so.

Getting a debt consolidation loan

When it comes to small business debt consolidation loan, the major advantage business persons may get is that if they don’t have access to any endowment, there is an option to offer their other assets as collateral to enjoy a lower interest rate. Your business assets can be considered as assets against lower interest rates than the individual loans offered.

However, the debt consolidation meaning also imposes a risk of losing all of your assets if you fail to make the repayment of the loans as per the terms. However, if there is no fall back security net to protect you, it will be safer to stick on to the higher interest rates.

The procedure for securing a debt consolidation loan is not much difficult, but to go for it, first you need to sit back and do a baseline evaluation of your current financial status to identify whether going for debt consolidation will be ideal for you or not.

Top options for debt consolidation

If you are seriously considering debt consolidation as a financial solution for business debts, you will come across many options to explore. However, only consider the best options in order to stay safe as well as to enjoy the desired benefits.

Along with specialized debt consolidation loans offered by many public and private financiers, some of the other consolidation options for small businesses also include:

q Effective use of credit cards is one of the major debt consolidation options.

q Home equity loan and home equity line of credit are used as a debt consolidation option by many.

q Personal loans.

q Cash advance from retirement or retirement or savings accounts.

Choosing a lender

As discussed above, there are many advantages of debt consolidation and there are also some innate risks to be faced. For small business owners, who are considering this option, it is essential to consider various available options. As we have seen, agencies such as Small Business Administration offer longer repayment term, but many of the financiers in the private sector may not be offering it. Make sure that with debt consolidation, you make the best financial business decision to enhance your small business performance as well as your personal finances.

Upon taking a wrong or uninformed decision, you may be into a deeper trouble within no time, even before you identify what is happening around. Some points to note while choosing a consolidation loan provider are:

1) Ensure that you are approaching only an approved and licensed financier.

2) Read through the fine prints to understand all the terms and conditions related to consolidation and clarify all your doubts before signing on any papers.

3) Check the reputation and service history of the lender to ensure that you are dealing with a trusted financier.

4) Check with your friends and business associates about their experience with debt consolidation to identify if there is anything, which may work adversely in your case.

Going ahead with loan consolidation is a well-thought decision to take if you wish to enjoy its real benefits overtime. More importantly, it is also essential for you to have a very disciplined and insightful approach to your financial management to get rid of the debt trap and lead a peaceful life.

Author Bio: Isabella Rossellini is a well-known economist and financial consultant to many major corporate and medium-level enterprises. Defining the debt consolidation meaning, she has many articles posted across the blogs and leading online finance portals.


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