What Are The Advantages Of Business Consolidation Loans?

There are quite a few myths that revolve around debt consolidation loans. However, if your small business is struggling, debt consolidation loan is your only option to keep yourself afloat. It is also the only option that will not dampen your credit score. Debt consolidation is the hero without a cape that has saved countless number of companies from going down under.

According to the American Small Business Administration, almost 30% of the new small companies do not survive their first year in the market and almost 50% of them go under in their fifth year. The lack of funding and consolidation resources are majorly responsible for their untimely departure from the marketing world. In this cutthroat world of business, it is miraculous to get another chance with debt consolidation.

There are quite a few benefits you can enjoy when working with companies that offer actual debt consolidation meaning. This means you can’t only get your company on solid ground but you can also enjoy added benefits.

The list includes:

Reduced APR

With timely filed consolidation loans, you can reduce your annual payment rates and interest rates. If you happen to have a great credit history, you can file for lower interest rates with a longer payment term. You can enjoy APRs as low as 12% for repayment terms of 5 years or longer.

Lower monthly payments

This is something almost all businesses look forward to. You can coalesce all your monthly payments into one payment that has a lower interest rate. This automatically reduces the net amount you’ll be paying each month.

Additional borrowing

This is one benefit most new entrepreneurs would kill to enjoy.

When you are applying for your consolidation loan, you can apply for additional money to fund your future projects. Because of your lower interest rates, you are likely to get an increased DSCR for your business. This means, you do not have to take out short term debts again when starting a new project soon.

Simplify cash flow

There are three ways you can enjoy better cash flow.

1. You will have to pay just one creditor, instead of 3 or 4. It gives you the chance to use the loan amount to pay your credit card bills. You can just manage one account and the rest of the payments will take care of themselves.

2. You do not have to deal with defaulter’s notices anymore or penalties for missed payments. The consolidation loan company will take care of timely payments. In addition to that, you get to enjoy making one pre-scheduled payment to your loan company every month.

3. Longer debt and longer payment terms call for lower monthly payments. You can easily save more cash and cover regular expenses without cutting corners.

Say goodbye to creditors

You can resolve all your lines of credits at one go with one large sum. You’ll be able to give your business freedom to grow and expand into new dimensions. You will not have to attend to creditor calls and you can even pay off all your credit card bills with the sanctioned amount. Consolidation loan has the power to free up your revolving credit lines.

Payments are more anticipated

You can coalesce many short-term loans into one loan with smaller payment amounts. You can also consolidate loans with variable interest rates under one loan amount that you can pay for a longer time period with a much lower, fixed interest rate. As a result, you can chalk out a definite plan and budget for the coming year in your business.

See Also: 5 Ways Business Investment Loans Can Help Your Start-Up

When dealing with consolidation loans, you will have to know how to negotiate for the best deals and better benefits. You need to find the right companies that offer the right kind of loans that your business needs to thrive.

There are currently two types of business consolidation loans that are available:

1. Secured debt consolidation loans

These are loans that come with usually low interest rates and low monthly payments as well. Secured loans mean that you will be pledging some form of tangible property against the loan. In that case, the lending party has more security about repayment.

It is not uncommon for a lending party to take possession of deposit accounts, business assets, and business equipment in case of missed payments. However, secured loans are better in terms of comparatively longer payment terms and low rates.

2. Unsecured debt consolidation loans

Since these do not require you to pledge any tangible property, they usually demand a high personal credit score. You will experience higher interest rates and monthly payments when you opt for unsecured consolidation loans.

You can usually get these unsecured loans from private lenders and alternative sources. Even P2P lending can help you out with unsecured loans. However, it is a little harder to get as compared to secured loans since it demands a squeaky clean business credit and personal credit.

Small business debt consolidation loan is quite a wonderful way to keep your business thriving in days of dire distress. This will not eat away into your credit score and you will still be qualified for more loans. Many businesses go bankrupt simply because they cannot figure out the right time to apply for a business consolidation loan.

Business consolidation loan is not bad for business, provided that you choose the right consolidating companies for the loans. The right company should be able give you added services, including debt counselling and debt management. Getting out of debt will not be a monumental challenge if you have the right company to help you out.

See Also: 4 Ways to Start Building Great Credit