How Business Debt Consolidation Can Save You Thousands

Managing multiple business debts can be overwhelming. Different payment dates, varying interest rates, and multiple lenders to deal with - it's a recipe for stress and potentially missed payments. Business debt consolidation offers a solution that can simplify your finances and save you money.

What is Business Debt Consolidation?

Debt consolidation involves taking out a new loan to pay off multiple existing debts. Instead of managing several payments, you make one monthly payment to one lender.

What Debts Can Be Consolidated?

•Business credit cards

•Lines of credit

•Merchant cash advances

•Equipment loans

•Short-term loans

•Vendor/supplier debts

Benefits of Debt Consolidation

1. Lower Interest Rates

If you have high-interest debt like credit cards or MCAs, consolidating into a lower-rate loan can save thousands.

Example:

•Credit card at 24% APR

•MCA at 40% factor rate

•Consolidation loan at 12% APR

•Potential savings: 50%+ on interest

2. Lower Monthly Payments

Extending your repayment term can significantly reduce monthly payments, improving cash flow.

Example:

•Current: $5,000/month across 4 debts

•After consolidation: $2,500/month on one loan

3. Simplified Management

One payment, one due date, one lender. Less chance of missed payments and late fees.

4. Improved Cash Flow

Lower payments mean more money available for operations, growth, or emergencies.

5. Fixed Repayment Schedule

Know exactly when you'll be debt-free with a fixed-term loan.

Real-World Example

Before Consolidation:

After Consolidation:

Monthly Savings: $1,840

Annual Savings: $22,080

Types of Debt Consolidation Loans

Term Loans

Traditional loans with fixed payments over 1-10 years. Best for most consolidation needs.

SBA Loans

Government-backed loans with lower rates and longer terms. Ideal for larger consolidations.

Lines of Credit

Revolving credit you can draw from. Good for ongoing consolidation needs.

Qualification Requirements

Lenders typically look for:

•Credit score: 600+ (higher scores get better rates)

•Time in business: 1+ years

•Annual revenue: $100,000+

•Cash flow: Positive or breakeven

•Debt-to-income ratio: Below 50%

When NOT to Consolidate

Consolidation isn't always the right choice:

1. If You'd Pay More Total Interest

Extending terms can mean more interest over time, even at lower rates.

2. If You Can't Address Root Causes

Consolidating won't help if you continue accumulating new debt.

3. If You're Near Payoff

If you're close to paying off existing debts, consolidation might not make sense.

4. If Fees Are Too High

Origination fees and prepayment penalties can offset savings.

Steps to Consolidate Business Debt

Step 1: List All Debts

Document every debt, balance, rate, and monthly payment.

Step 2: Check Your Credit

Know where you stand before applying.

Step 3: Compare Options

Get quotes from multiple lenders to find the best terms.

Step 4: Calculate Total Costs

Consider all fees and total interest over the loan life.

Step 5: Apply and Pay Off Debts

Once approved, use the funds to pay off existing debts immediately.

Step 6: Close Old Accounts (Optional)

Consider closing paid accounts to avoid temptation.

The Bottom Line

Business debt consolidation can be a powerful tool for simplifying your finances and saving money - but only if done strategically. Make sure the math works in your favor before proceeding.

Ready to see your consolidation options? Check your rate with FastLoan to compare offers from multiple lenders.