One of the most reputed websites, www.forbes.com states that 90% of businesses cannot stand strong because they do not make enough money for clearing debts.
The commercial debt has seen a steady increase over the last few years especially because of the crisis that the businesses are facing financially.
There are limited options that are available for funding the business ventures. Most of the businesses are constantly relying on loans as well as various other kinds of financing so that they are capable of maintaining the cash flow as well as handling the various other needs associated with the business.
Since there has been a sudden drop in the bank loans, most of the business owners are taking loans from the online lenders, who are responsible for offering an easy availability of cash, but the interest rates are extremely high. You also cannot ignore the fees that they keep charging.
Since the business lenders are looking for a way to reduce the risk exposure, they tend to provide loans for short terms so that the long schedules of repayment can be avoided, which businesses can fail to repay. Since the terms of repayment of these loans are extremely short, the businesses have to give huge daily or weekly payments, which can have a negative impact on the cash flow of the company.
Knowing about debt consolidation
Consolidating the business debts include combining a multitude of loans as well as debt obligations within one single loan. You do not need to get confused with the process of refinancing your business loan, which involves paying higher rates of loans by getting the business loans that have low rates of interest.
The main motive of a debt consolidation loan is reducing the total amount that is being paid by a business for servicing the debt amount, by merging all the debts into one facility, which is going to make the ability to pay the commercial debt in a convenient manner.
A debt consolidation loan is not similar to refinancing your business debt. Though the primary objective of a debt consolidation loan is not reducing the rate of interest, you can be assured that all the loans are combined into a single financing facility. Moreover, chances are that the company is going to free up the flow of cash.
Why is it required to consolidate the commercial loans?
Given below is a list of the reasons as to why you should consolidate your commercial loans.
- It helps in combining the different business loans.
- The service payments of the debts are lowered.
- The rates of interest have a possibility of getting reduced.
- The terms of payment can be extended.
- Cash can be freed up.
Options that small businesses have for consolidating their loans
The options of consolidating both the business debts as well as the commercial loans are normally offered by various traditional banks, with the help of the credit lines or the term loans.
There are various lending options for consolidating the debts of a company. Given below is a list of the different loan options as well as financing facilities that can be used for consolidating the debt and loans of your business.
Consolidating the loans through banks
Consolidating the business loans through your traditional banks, whether they are large, small, or the community banks, can normally be done with the help of standard loan financing facilities. However, small businesses can obtain credit lines when they are consolidating various business loans.
The reason behind this is that the banks tend to provide a sufficient amount of working capital in order to ensure that the organization is successful, which increases the chances of getting the money back.
The bank loans, in order to consolidate the small business debts, are considered to be ideal ways of consolidating the commercial debt.
This is because the banks are known to offer ideal rates of interest as well as terms in comparison to the other commercial lenders. Banks can also offer loan products that are superior because the risk taken is minimal.
SBA consolidation loan
SBA loans for consolidating the business debts cannot be obtained easily. SBA is not going to consolidate or refinance the business debt, which has not been provided by an SBA lender.
However, there are certain situations, which allow the small businesses to consolidate their loans for increasing the cash flow. You can go through nationaldebtreliefprograms.com to know more.
Merchant Cash Advance Consolidation
This is another kind of financing, where the cash advance or factoring lender purchases the 2nd to the 5th position of cash advance, thereby consolidating the entire advances into one advance, with the help of a weekly or single payment, as well as, a long term.
Most of the advance organizations require merchants to pay twenty-five percent financing.
Alternative consolidation loans for small business
If organizations are not capable of securing the financing for consolidating the business loans that already exist, they also have the freedom of exploring the lending option.
The alternative lenders are famous for offering the term loans as well as other products of financing for consolidating the small amounts of the business debts.
There is hardly any access to the bank rates financing, and this is why, most of the businesses are relying on short-term, high term, as well as an expensive merchant cash advance for maintaining the cash flow.
Nevertheless, when they do so, they end up being trapped, as they have to keep renewing the merchant cash advance. For escaping this unwanted trap, options are available to businesses for combining the cash advance into one loan.
This is going to assist in improving the cash flow dramatically. Moreover, the terms are also going to be extended, which is great.
Most of the consolidated loans have short terms along with a variable rate of interest. Therefore, your payment is also going to change with time, and it is not going to be possible to accurately budget a similar amount on all the payment dates.
Consolidated business loans, that have fixed rates of interest, help in the accurate budgeting of the loan costs.
Go through all the options that have been mentioned above for consolidating the loans, and you will surely be able to find the one that is appropriate for you.
Kelly Wilson is an experienced and skilled Business Consultant and Financial advisor in the USA. She helps clients both personal and professional in long-term wealth building plans. During her spare time, she loves to write on Business, Finance, Marketing, Social Media. She loves to share her knowledge and Experts tips with her readers.