Why a Business Debt Consolidation Loan Makes Sense for Restaurants

Why a Business Debt Consolidation Loan Makes Sense for Restaurants
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The restaurant and foodservice industry is fast-paced, competitive, and can often operate on razor-thin profit margins.

Entrepreneurs, owners & operators of restaurants and foodservice businesses need every advantage to contain costs, run day-to-day operations, market their business, differentiate themselves from the competition, draw in customers & deliver outstanding experiences in order to survive. 

One thing that can often detract from the operations of a restaurant or foodservice business is a high debt load, which can rapidly eat into profits (no pun intended). 

Managing significant debt in many businesses can become a second full-time job for small business owners, who should be focusing on the more important aspects of running a restaurant or similar venture. But it doesn’t have to be quite that bad, even if you’re not a financial pro. 

The prolific amount of business debt advice, and sites telling you “how to get out of business debt” on the Internet are a testament to the interest in this topic, and the need for sound debt help for small business owners. 

One of the best options to consider is a business debt consolidation loan, as it’s a cost-effective, cost-saving, quick, and easy way to address your debt load and make your life easier. 

Below, we’ll address some aspects of business debt consolidation loans, including a deeper dive on how debt impacts restaurants, the basics of small business debt consolidation loans, a discussion of the pros and cons of debt consolidation for business owners, particularly those in foodservice businesses, and answer some common questions relating to business debt consolidation loans. 

Finally, we’ll highlight the business debt consolidation loans available from BizFly Funding, one of the leading private small business lenders in the US today.

The Problem with a High Debt Load for Restaurant and Foodservice Businesses

As we touched on in our introduction to this topic, debt load can have a profound effect on tangible aspects of a restaurant or foodservice business operation.

It can also have many more subtle (and often more devastating) effects on things like morale, focus, attention, and where owners spend their time.

The Problem with a High Debt Load for Restaurant and Foodservice Businesses

There really are a range of problems that can result, both in the present and in potential future scenarios, for small business owners struggling with debt.

Examples include:

  • Significant debt service expenses, which can reduce or eliminate any profits turned from your operations.
  • Reduced funding availability, which can mean issues in meeting inventory needs, or compromises in food quality, sourcing, and related tasks.
  • Inability to respond to seasonal or cyclical changes in the business, or to deal with unexpected expenses (a broken walk-in freezer doesn’t fix itself).
  • Multiple debt service payments to be made monthly to multiple processors, complicating your bookkeeping, and requiring a lot more attention and back-office time.
  • Decreased owner focus on the business operations, as concern with the mounting debt load increases.
  • Increased stress, more work for restaurant management, and friction developing in the workplace.
  • Inability to undertake marketing or other efforts needed to keep the business profitable.
  • Difficulty in obtaining additional funding, lines of credit, or other sources of small business financing due to debt load.
  • Negative impact on your credit score, which can also make it harder to get the funding you need to operate and survive leaner times.

The Basics of a Business Debt Consolidation Loan

Fortunately, there are solutions to this problem. One of the best is a business debt consolidation loan. Business debt consolidation loans are similar to ordinary loans, in that they give you an amount of cash up-front, and then you pay back the loan over time, with interest.

Where they differ is their intended purpose. Business debt consolidation loans are used to pay off multiple existing debts to their servicers, leaving you with a single debt – the small business debt consolidation loan – and a single servicer.

The Basics of a Business Debt Consolidation Loan

In many cases, business consolidation loans can also offer lower interest rates (depending on market conditions and other factors) than some or all of the existing debts you may be carrying. Business debt consolidation loans may be secured (requiring collateral) or unsecured. 

Typically, the interest rates will be lower on secured loans, but they are a larger risk for the borrower. By contrast, unsecured loans have slightly higher interest rates, but no risk to the collateral of the borrower. 

As a result, unsecured business debt consolidation loans are often the most-desirable for restaurant and foodservice business owners, and many small business owners in general.  To use the business debt consolidation loan, you take the proceeds and pay down other existing debts. 

To achieve the most savings, it’s best to start with the debts you have that have the highest interest rate – which often means credit cards. These debts are eliminated, effectively being transferred to the new, single debt consolidation loan, usually at a lower rate, too.

It doesn’t change your immediate outstanding debt balance, but does have numerous positive effects, as we’ll discuss in the next section.

Advantages of Business Debt Consolidation

There are numerous advantages and benefits to debt consolidation with a business debt consolidation loan. Some of these can be realized immediately, whereas others will accrue over a longer period of time. 

Many of the key benefits revolve around saving you time, money, hassle, or all three.

Advantages of Business Debt Consolidation

Advantages and benefits include:

  • Fewer servicers to deal with and fewer payments to be made. This streamlines the debt repayment process, cutting out a lot of payments, wasted time, and hassle each month. It simplifies your outgoing expenses for debt service. It can also save you significantly in fees and surcharges from multiple servicers.
  • Business debt consolidation loans enable you to pay down higher interest debt, leaving you with a lower interest rate business consolidation loan.

    Depending on your loan amount, outstanding balances, and existing interest rates, this can save you hundreds, thousands, or even tens of thousands of dollars over the life of the debts. That’s money you can put towards your business and operations, or retain as profits.
  • Decreasing your debt load makes it easier to respond to changes in your business finances and conditions. The first step in most guides to “how to get out of business debt” is to have less debt and more cash on hand, and that can be achieved with business debt consolidation loans.
  • As a form of debt help for small businesses, it doesn’t cost you hundreds or thousands in service fees, which is not the case with debt consolidation or debt settlement services.

    When you use a small business debt consolidation loan, you handle everything and pay off your creditors all at once – simple, easy, and effective, with no ongoing costs.
  • By paying down existing debt with a new business debt consolidation loan, you increase your borrowing power and ability to respond to business needs.

    For example, paying down an outstanding credit card balance of $20,000 means you have increased your borrowing power by $20,000.

Limitations of Business Debt Consolidation and Business Debt Advice

Naturally, there are also some limitations to business debt consolidation loans, like any business debt advice or debt help for small business options.

Limitations of Business Debt Consolidation and Business Debt Advice

These can include:

  • Business debt consolidation loans don’t immediately change your outstanding debt total.
  • There is no guarantee a business debt consolidation loan will offer a lower interest rate than your current debts.
  • Like any loan or credit product, you may not qualify for a business debt consolidation loan.
  • Business debt consolidation loans don’t wipe out any debt, in the same way that debt settlement does. However, it also doesn’t damage your credit score the way debt settlement does, either.

Business Debt Consolidation Loans from BizFly Funding

If you own a restaurant, foodservice business, or any kind of small business, and are looking for business debt consolidation loans, look no further than BizFly Funding. 

BizFly Funding is a private, non-bank lender, based in the US, that deals exclusively with small business funding and financing. They offer numerous small business financing products, including business debt consolidation loans

They’re not a debt consolidation or debt settlement company, so there are no absurd fees to be paid or negotiations to be had – simply high-quality, affordable small business debt consolidation loans and other funding products. 

To learn more or start the application process, visit https://bizflyfunding.com.

Frequently Asked Questions about Business Debt Consolidation Loans

Many private lenders offer business debt consolidation loans, even for businesses that have poor credit scores. 

Each case is unique, but the requirements for business debt consolidation at private lenders are usually easier to meet than those at banks. 

Small business debt consolidation loans are not the same thing as engaging the services of a debt consolidation company. 

However, the goal of both debt help for small business options is largely the same. With a loan, you take care of it yourself directly with your creditors. 

Debt consolidation companies act as middlemen to handle all that, but need to get paid for their services, eating into any potential savings you can realize from the business debt consolidation process. 

Debt consolidation for business owners, either through a business debt consolidation loan or debt consolidation company, does not attempt to settle your debt for less than it is worth.

It does not indicate you are financially distressed, but rather simply is a matter of bookkeeping and management of your debt, with every intention to fully repay it.

Debt settlement involves settling debt for less than the value on the books, and typically comes with hefty credit score penalties, lengthy negotiations, and high service fees for debt settlement companies. 

Business debt consolidation loans can actually help improve your credit, by reducing your outstanding debt on various revolving facilities like lines of credit or credit cards, and paying off existing loans. 

While it doesn’t decrease your total outstanding debt amount, it can boost your credit score based on what debts you have and pay off with the loan. 

Of course, it can hurt your credit somewhat, as with any loan, if you fail to make the required repayments on time. 

Unsecured business debt consolidation loans are usually the best choice for restaurants, foodservice businesses, and other small businesses. 

They have a slightly higher interest rate than their secured counterparts, but don’t require you to risk valuable collateral. 

Most business owners don’t want to risk their property, equipment, inventory, or other assets as collateral for the loan if they can avoid it, as it would be forfeit if loan repayment isn’t made. 

With unsecured business debt consolidation loans, you don’t have to. 

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