Debt Consolidation for Your Business: Do You Need It
A business in debt is one that needs immediate attention. Multiple business loans can make for an overwhelming task to oversee—one you’ll never want to skip the bill on. If you’d prefer to join your business debts into a single payment, you might want to think about debt consolidation.
What is Debt Consolidation?
For Australian business owners, nothing is more staggering than having to keep up with numerous credit cards and avoiding late payment penalties. With a business debt consolidation loan, you leverage the available funds to pay off all existing debts. As such, you can adhere to a single payment to a sole lender as opposed to chasing down several.
When Should You Consider Business Debt Consolidation?
Whether a business debt consolidation loan is the right choice for your growing company will depend on your financial circumstances. If you’ve taken on various debts during a tumultuous fiscal period but have a sufficient credit rating, a business debt consolidation loan may be appropriate.
The Benefits of a Business Debt Consolidation Loan
The advantages of a business debt consolidation loan are plentiful. With one, you can:
Simplify Business Finances
Being able to deal with one lender means doing without your clogged spreadsheet of various payment plans. Especially for startups and small business owners, it’s imperative to avoid overcomplicating your finances. Combined into a solitary business loan, you can more accurately track your progress as you eventually repay your fees.
Save a Lot of Money
If your financial situation is already on the up-and-up, you can finance your debts at a lower rate. As such, you’ll save more money repaying your debts as opposed to funnelling your spend towards a high-interest rate.
The Drawbacks of a Business Debt Consolidation Loan
Despite their attractive features, business debt consolidation loans aren’t for everyone. Some cons you might expect are:
Difficulty Getting Approved
If you’re banking on a debt consolidation loan, a good credit score might not cut it. Some lenders will require that you give up collateral in the form of assets or real estate. If your existing debts are attached to tax debts to the ATO, lenders may choose not to finance them. Not to mention, the amount of paperwork on traditional bank loans is often excessive.
Extended Payment Terms
Some business loans that consolidate debts extend repayment terms, which can charge you higher interest rates in the long run.
Options for Consolidating Business Debts
When mulling over a consolidated business loan, shop various loan terms, interest rates, and additional fees. Align these with your ability to repay loans on time and that you have the cash flow to do so.
Though business overdrafts and business lines of credit don’t have a set payment schedule, forgetting to repay your debts can mount them.
Some business owners opt to apply for personal loans or top up on home loans to consolidate debts. However, personal finances won’t allow you to build a business credit history, which is vital to securing business financing in the future. Additionally, combining business and personal finances can complicate your accounting process.
When it comes to repaying business debts, refrain from options that combine personal finance or waive deadlines. By adhering to monthly reminders, you grow into the habit of budgeting—and with only one debt to keep track of, you can focus on business operations that genuinely matter.
For a quick solution to your Australian business’ financial problems, give us a call at Business Loan Experts. By helping you control your budget, you can grow your profit with small business loans in Sydney or Melbourne that don’t break the bank.