Running an independent business when you have multiple debtors can be a challenge. Trying to keep tabs on multiple debts going out, each with different potentially levels of interest or fees can cause serious financial issues if not dealt with effectively.
Consolidating debts which your business has can be a way to make the entire situation more manageable. We’ve pulled together some details to help businesses who are experiencing cash flow issues and difficulty with debts so they can improve their situation.
How Does Business Debt Consolidation Work?
Debt consolidation effectively works by using a single financial product to take out funds to pay off outstanding debts and loans, leaving only that single product left to repay.
By using the services of debt consolidation providers, you can research the terms which work best for your business.
This can be incredibly useful if your outstanding debts carry a high level of interest which would cause further financial difficulties if left unchecked. In that case, an Insolvency Practitioner can help advise you on the best course of action to remedy your debt and get back on track.
How Can You Consolidate Business debt?
Planning your finances
Firstly, you’ll want to review your financial position as a business. Look over how many individual parties you own, how much is owed, and what the interest on those amount would be.
From there, you can think about the goals of using debt consolidation. Are you trying to lower the monthly repayments? Find a lower interest rate? Struggling to manage multiple debts. This can guide to in finding the right loan provider and find terms that work for you.
Assess the best form of consolidation
You can decide what proportion of your debts you want to consolidate through business debt consolidation, or you may want to consolidate all your debts. The overall amount you’re looking to consolidate, the longer you may want to stretch the terms in order to leave you with more cash free each month for operating your business.
Make sure the terms of your existing loans and debts don’t have small print that may catch you out, such as pre-payment penalties.
Finding a lender
After you’ve made you plan for what you want out of your business debt consolidation loan, you can track down lenders where you’re likely to be approved. Some will lean more on your credit score, while other may want to review the current state of your business.
You’ll likely need copies of various financial documents in order to be approved, so make sure you have statements and a business plan to hand so you can expedite the process as much as possible.
Submit an application and start consolidating your debts
Once you’ve approached a lender and met their criteria, you’ll need to submit a formal application along with the relevant paperwork. There could be a period of time required for processing, but after it has landed in your account then you can approach your original loan providers for accurate amounts required to clear your debts.
If you feel like business debt consolidation could benefit your business, contacting a financial advisor could help you get the information you need to make an informed decision about your business.