The Benefits of Using Debt Consolidation to Manage Small Business Loans

 If your small business is drowning in debt, business debt consolidation might help you more effectively manage your repayment schedule while reducing your interest rates, helping you lower your total payments. National Credit Partners is one of the top business debt consolidation companies in the U.S., giving small businesses the tools and support they need to overcome their financial challenges and focus on running their operations.

Business debt consolidation is the process of combining several existing debts into a single debt — ideally one with a lower overall interest rate, so your combined monthly payment is less than the sum of the payments it replaces. For an owner juggling multiple creditors and payment deadlines, rolling everything into one obligation can make the debt far easier to manage.

Regardless of which debt restructuring solution you might use to meet your repayment challenges, your ultimate goal is to unburden yourself from your business-related debt. However, a debt consolidation loan might be the most effective strategy for a variety of reasons. While applying for a debt consolidation loan might take a bit of effort since you’ll have to demonstrate the strength of your business operations and present additional financial information supporting your worthiness, debt consolidation offers numerous benefits. Here are a few reasons why debt consolidation could be a great option for your small business.

• You’ll work with a single creditor. This is a significant advantage for many people seeking debt consolidation, since it simplifies the repayment process and makes communications easier. If your loans are so expansive that you find it difficult to track individual payments, this might be the single most beneficial component of your debt restructuring program. Juggling several due dates also makes it easy to miss a payment — which can mean running afoul of creditors, a lower credit score, and losing access to future loans — so simplifying to one payment reduces that risk.

• You might find more favorable interest rates. You can negotiate a lower overall interest rate when you apply for a small business debt consolidation loan. If your loans are high-interest and unsecured, switching to a secured loan if you have equipment or other assets that can be used as collateral can save you a lot of money.

• You only make one monthly payment. Making only one payment per month as opposed to multiple payments throughout the month gives you the freedom to focus on your business. Although the single monthly payment will be larger than any individual payment you made prior to your debt consolidation, it will save you money long-term if you successfully negotiate a lower interest rate.
• You can invest in your business operations. Debt consolidation empowers you with the resources and the time to more effectively manage your business. This might involve hiring additional staff, improving your equipment, or expanding your range of products and services.

Debt consolidation vs. debt refinancing

Consolidation and refinancing are often confused, but they are not the same thing. Consolidation combines several debts into one — useful when you have multiple smaller debts with different lenders and want a single, simpler payment. Refinancing replaces an existing debt with a new one that carries better terms — for example, taking out a new, lower-interest loan to pay off an existing higher-interest one. Put simply, consolidation tackles the number of debts you carry; refinancing tackles the terms of a debt.

The two are not mutually exclusive, either: you could consolidate several debts into one loan and later refinance that loan, or consolidate debts you have already refinanced. As a rule of thumb, consolidation tends to suit a business with several small balances spread across different lenders, while refinancing suits making a single, larger obligation more manageable over the long term. Which route fits depends on your specific debts — and for many over-leveraged businesses, neither one is enough on its own, which is where structured debt restructuring comes in.