Most business owners use some form of financing to fund operations and help their business grow. As your company gets larger, keeping track of and paying down each of these financing options can get overwhelming. Many businesses find that business debt consolidation is a valuable solution to having too many loans or debts from too many finance providers.
Keith Dahms, Senior Finance Specialist at Capital Access RBL, has put together the basics of Business Debt Consolidation below:
What is Debt Consolidation?
Debt consolidation involves combining several loans or debts into one single debt, typically by taking out a single loan to pay off multiple debtors. Traditional debt consolidation helps by offering one consolidated payment, a faster pay off time, and a lower interest rate when compared to paying off multiple loans separately.
How Do I know if I Need Debt Consolidation?
There are many factors to consider when evaluating your business’s need for debt consolidation. Discussing your situation with a finance specialist is the best way to determine if debt consolidation is right for your business. However, if you find it overwhelming to service your businesses existing debts due to a cash flow hiccup or simply from having too many debtors, then debt consolidation may be a good solution.
Are There Risks Involved in Debt Consolidation?
Simply put, a debt consolidation loan should serve two purposes:
- To make your life simpler by consolidating many recurring debt payments into one-single payment.
- Reduce the amount of interest paid during the life-span of your loans.
If debt consolidation does not accomplish both of the above goals, it’s probably not a great fit for your current situation.