Business Debt Consolidation Loan

Sometimes in business, you have to take a step in a direction you don’t really want to go in order to get to where you really do want to go. This is the case when a business is having a difficult time managing its debt load to the point where the business itself will be hurt if the debt is not somehow reduced.

One way to manage this and turn things around is to use a financial tool called a business debt consolidation loan. These loans are very similar to those that individuals take out to use for paying off old high interest credit card bills and other debts when that individual is in a financial pinch and just needs a break from payments with some more time to pay off the debt load.

Businesses can profit from a business debt consolidation loan in the same manner. If, for example, a business owes around $1,000 a month in old bills and that is straining or breaking the budget, getting a debt consolidation loan can be the solution. By paying just a fraction of the old debt amount monthly, like $100 instead of $1000, and spreading the old debt around for a year or more, a business consolidation loan can make a big difference in business profitability.

If there is a lag in current business or because others things took precedence, like buying new equipment to make the business more efficient, getting relief from that big old debt load can help. Instead of skimping or missing payments, the business can move forward and not miss opportunities for growth. The financial relief that comes from getting a business consolidation debt loan is just as great as that felt by individuals who get out from under their debt load with a personal bill consolidation loan.

Business consolidation loans can be either unsecured or secured. The unsecured loans are viewed as being rather risky by lenders because business loans are for much more money than individual loans. If a business has problems due to management, this is even worse in the eyes of the lender. Secured loans are backed by some type of collateral, either from the business assets or from the owner’s assets.

Businesses have their own credit report and credit scoring systems with credit reporting bureaus. Just as with individuals, the businesses that have higher scores will be able to negotiate better loan interest rates. Finding actual rates for business debt consolidation is not as easy as finding other types of loan rates. Each loan must be individually negotiated with the lender and variables such as credit history, financial information, principals involved and so on are different for each company.

These loan interest rates are comparable to other consumer debt consolidation interest rates, around 8% to14% interest. This can be a break from credit card and merchant interest rates that can be much higher for businesses. Lines of credit are another financing option; rates are tied to the prime interest rate and are variable, with annual fees and some other fees attached. Rates vary daily according to the latest information of the day of the loan closing.