Is Debt Consolidation the Right Move for Your Company?
Debt consolidation can often be a good financial strategy for small businesses. In essence, the business takes out a new loan to repay various loans and credit lines. Debt consolidation offers many benefits for businesses, but there are some considerations to think about before you sign on the dotted line.
Advantages to Debt Consolidation
A big benefit of consolidating your debts is that you only deal with a single creditor and payment each month. You don’t have to worry about missing a payment like you might if you have several bills coming in at various times through the month. If you’re drowning in debt, you won’t have several debtors calling you each month.
In addition, you should choose a loan that gives you lower interest rates to save money. Interest rates can be the bulk of debt repayment. When the interest rate on your debt consolidation loan is much lower than the current rates of your debt, it makes sense to try to pay off the higher interest loans.
What to Keep in Mind
With debt consolidation, you may draw out the payment period, so you may be paying more in interest than you first thought. Make sure you don’t get yourself into an extended loan that doesn’t benefit you in some way. Debt consolidation can often be a temporary solution instead of a permanent fix. The problem in your business isn’t that you have multiple loans, it’s that you are spending more money than you’re making. You’ll need to find other ways to increase your cash flow to get out from under the debt and avoid taking more on.
Really do your research before signing on the dotted line to consolidate your debt. Make sure you have a strategy that avoids using your home or savings as collateral. Talk to the financial experts at Royalty Business Lending about debt consolidation and how it can fit into your business.