There are many myths surrounding debt consolidation loans. However, if your small business is in trouble, the debt consolidation loan is your only option to keep you afloat. It is also the only option that will not reduce your credit score. Debt consolidation is the hero without a cape that has saved countless businesses from bankruptcy.
SummaryReduced APRLower monthly paymentsAdditional borrowingSimplify cash flowSay goodbye to creditorsPayments come earlierAccording to the American Small Business Administration, nearly 30% of new small businesses do not survive their first year in the market, and nearly 50% of them fail in their fifth year. The lack of funding and consolidation resources is largely responsible for their untimely departure from the marketing world. In this cutthroat world of business, it is miraculous to have another chance at debt consolidation.
There are many benefits you can enjoy when you work with companies that offer real debt consolidation meaning. This means that you can not only put your business on a solid footing, but also enjoy additional benefits.
The list includes:
With timely filed consolidation loans, you can reduce your annual payment rates and interest rates. If you have a good credit history, you can apply for lower interest rates with a longer payment term. You can enjoy APRs as low as 12% for repayment terms of 5 years or more.
This is something that almost every business looks forward to. You can merge all your monthly payments into one payment with a lower interest rate. This automatically reduces the net amount you will pay each month.
This is a perk that most new entrepreneurs would kill.
When you apply for your consolidation loan, you can request additional money to finance your future projects. Because of your lower interest rates, you will likely get a higher DSCR for your business. This means that you do not have to take on short-term debt again when starting a new project soon.
There are three ways to enjoy better cash flow.
1. You will only have to pay one creditor, instead of 3 or 4. This gives you the flexibility to use the loan amount to pay your credit card bills. You can only manage one account and the rest of the payments will take care of themselves.
2. You no longer have to deal with default notices or penalties for missed payments. The consolidation loan company will take care of the timely payments. On top of that, you can enjoy a prearranged payment to your lending company every month.
3. Longer debt and longer payment terms require lower monthly payments. You can easily save more money and cover day-to-day expenses without cutting corners.
You can clear all of your credit lines at once with one large sum. You will be able to give your business the freedom to grow and take on new dimensions. You won't have to attend creditor calls and you can even pay all your credit card bills with the sanctioned amount. The consolidation loan has the power to release your revolving lines of credit.
You can merge many short-term loans into one loan with smaller payment amounts. You can also bundle variable interest rate loans into a loan amount that you can pay for a longer period with a much lower fixed interest rate. As a result, you can set an accurate plan and budget for the coming year in your business.
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When it comes to consolidation loans, you'll need to know how to negotiate the best deals and benefits. You need to find the right companies that offer the right kind of loans your business needs to thrive.
There are currently two types of business consolidation loans available:
1. Secured Debt Consolidation Loans
These are loans with generally low interest rates and low monthly payments. Secured loans mean that you will pledge some form of tangible property against the loan. In this case, the lender has more security on the repayment.
It is not uncommon for a lender to take possession of deposit accounts, business assets and business equipment in the event of late payment. However, secured loans are better in terms of comparatively longer payment terms and low rates.
2. Unsecured Debt Consolidation Loans
Since these do not require you to pledge tangible assets, they generally require a high personal credit score. You will enjoy higher interest rates and monthly payments when you opt for unsecured consolidation loans.
You can usually get these unsecured loans from private lenders and alternative sources. Even P2P loans can help you with unsecured loans. However, it is a bit more difficult to obtain compared to secured loans, as it requires perfectly clean business credit and personal credit.
The small business debt consolidation loan is a great way to keep your business thriving in times of great distress. It won't eat away at your credit score and you'll still qualify for more loans. Many businesses fail simply because they cannot find the right time to apply for a business consolidation loan.
Business consolidation loan is not bad for business, provided you choose the right consolidation companies for loans. The right company should be able to offer you additional services, including debt counseling and debt management. Getting out of debt won't be a monumental challenge if you have the right company to help you.
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