However, it’s easy for that debt to creep up on you, and end up costing you more than you thought. When you have significant or multiple debts, business debt advice can be quite valuable.
There are several options for you to consider, including small business debt consolidation via business debt consolidation loans.
Below, we offer up 4 key pieces of business debt advice to help small business owners manage and pay down their debt, avoid excessive fees or high interest rates, and obtain valuable small business debt consolidation loans when needed.
What is business debt, anyway?
Any loan, credit, equity, or other financial instrument that you have to repay in one way or another would be classified as business debt.
As we’re mostly focusing on small business debt consolidation and business debt advice for small businesses, we’ll forego discussion of stock shares, options, and contracts, which would also generally be classified as debt.
For most small business owners, the main forms of debt they’ll deal with are loans, lines of credit, credit cards, mortgages, accounts payable, and contractual terms and agreements.
Business Debt Advice #1: Avoid Adding New Debt
It may seem like an obvious piece of business debt advice, but it really can’t be stressed enough: if you are struggling with business debt, you should avoid adding new debt.
Now, that doesn’t include debt instruments like business debt consolidation loans (see advice #4 below), because that’s not adding any new net debt.
But taking on new small business loans, lines of credit, credit card accounts, and other debts should be avoided at all costs.
Adding debt can effectively snowball because of interest rates and service fees from the various loan and debt product servicers you may be dealing within your business.
While it can be tempting to take out new loans and add more debt when you need quick cash for a business opportunity or expense, it should be only a matter of last resort.
Business Debt Advice #2: Prioritize Repayments
One of the most basic ways of handling your business debt is to prioritize your repayments. You should always strive to pay off your debts with the highest interest rates first in order to save yourself the most money possible.
It may even be advisable to take out a new, low-interest loan in order to pay off a higher interest loan. This is the crux of what small business debt restructuring and refinancing are all about.
Even absent that process, and without taking on any new loans or debt burdens, you should always ensure you pay your highest interest rate debt first, and put any extra money you can toward paying down the principal on your highest interest rate debt.
For many seeking small business debt advice, this means paying down credit cards, short-term business loans, and similar products first, with longer-term loans – especially those backed by the SBA or secured with collateral – being prioritized lower down the list.
In all cases, you should remain current with your loans, of course, but seek to pay off the highest interest rate debt first – even if it’s not the largest debt you are carrying – because it will save you the most money.
Business Debt Advice #3: Find New Cash Sources
The third piece of business debt advice we have for you is easier said than done: find new cash sources. Obviously, growing your business, increasing sales, and so on is part and parcel of your normal operations.
Often, it takes money to make money, so this doesn’t mean jumping on new opportunities that will require investment. However, there can often be ways to find new cash sources within your existing business.
Some examples include:
Business Debt Advice #4: Consolidate Business Debt
Perhaps the most effective way to handle business debt, and one of the best pieces of business debt advice, is to consider small business debt consolidation.
The process of debt consolidation for business owners can be a bit intimidating at first, but it’s actually quite simple.
First, you find a lender who offers small business debt consolidation loans. Then, you apply and get approved for one of these loans.
Using the proceeds from the loan, you pay off your existing debts at the multiple servicers who hold them. This means there is no net change to your outstanding debt.
However, you can end up paying less in service fees each month when you are only dealing with a single loan servicer – the holder of your business debt consolidation loan.
In most cases, you can also take out a business debt consolidation loan at a lower interest rate than many of your existing debts. Credit card debts, in particular, are extremely high interest rate debt.
As with our business debt advice #2 above, prioritize and use the business debt consolidation loan to pay off the highest interest rate debt first. This way, you’re saving both on service fees and in terms of interest payments.
Finally, business debt consolidation loans are useful in another way: they streamline your monthly repayment process.
Instead of dealing with 4, 6, 10, 12, or however many loans and debt products you have, and repayment dates that may be spread all over the calendar, you have a single debt instrument to repay now, typically once per month, at a single servicer.
The amount of time, stress, and energy saved for your business can be immense, and often hard to put a price on. This is one of the most valuable indirect benefits of a small business debt consolidation loan.
Business Debt Consolidation Loans from BizFly Funding
If you have existing business debt and could benefit from small business debt consolidation, then consider a business debt consolidation loan from BizFly Funding.
BizFly Funding is a leader in small business-focused lending in the US. They offer a full range of small business funding products, including business debt consolidation loans.
Apply online or learn more by visiting BizFly Funding’s website at https://bizflyfunding.com.
Frequently Asked Questions about Small Business Debt Consolidation
Debt consolidation for business owners doesn’t typically appear on your credit history or any kind of record.
The way in which small business debt consolidation works means that, as far as your existing lenders are concerned, you’ve simply paid them back early in full.
Your new business debt consolidation loan is taken out for the amount of debt you repaid, meaning there is no net change in your outstanding debt, either.
Debt settlement, on the other hand, where you settle debt for less than your creditors are owed, does appear on your credit history, and will negatively affect it.
This is quite different from small business debt consolidation loans, and yet another reason why debt consolidation for business owners is often the first line of business debt advice.
Small business debt consolidation is often possible, even with bad credit. Most lenders do not set a specific minimum credit score threshold for their business debt consolidation loans.
Rather, they’ll review the overall debt, revenue, and other metrics associated with your business in order to determine your approval.
Obviously, a higher credit score typically increases your likelihood of being approved for a debt consolidation loan. However, many businesses with bad or poor credit are still able to qualify for a business debt consolidation loan.
The best way to maximize your chances of qualifying is to choose a private, non-bank lender that is dedicated to small business funding, such as BizFly Funding.
Consolidating your debt with small business debt consolidation loans is fairly straightforward.
You take out a new business debt consolidation loan, either for the full amount of your outstanding debt, or for as high an amount as you can get approved.
With the proceeds from this business debt consolidation loan, you pay off your existing debts, in full or in part, prioritizing the highest interest rate debt first.
In an ideal situation of debt consolidation for business owners, you’ll get a business debt consolidation loan for the full amount of your existing debts from multiple lenders, pay those debts off, and be left with a single debt – the business debt consolidation loan – and a single lender to deal with.
You then pay off this loan over the time frame specified in the loan agreement, ideally at a lower interest rate and with fewer fees than your debt prior to consolidation.
In most cases, debt consolidation does not directly have an impact on your credit score.
Because small business debt consolidation puts all new loan proceeds towards paying down existing debt, there’s no net increase in your outstanding debt load. By paying off several existing debts, if anything, you may increase your credit score.
In the long run, the business debt consolidation loan makes paying off your debts more affordable, saving you money, and thus increasing your financial solvency, leaving you more able to pay your bills on time, and with a lower debt load – two things that should help your credit score improve long-term.
Every business is unique, and every financial situation is different.
Therefore, most lenders who offer small business debt consolidation and business debt consolidation loans will evaluate the particulars of your business in order to determine if you qualify, and for how large a loan.
Some lenders may offer basic qualification requirements, but most of the better lenders will work with you directly to try to offer you the best small business debt consolidation and business debt advice tailored specifically for your business.