Businesses of all sizes can benefit from debt consolidation. Drowning in debt personally or professionally isn’t fun either way. Worse yet, business debt can force a company to close its doors forever. If you’re the business owner, this can also cause you to lose your source of income, which can lead to personal debt issues too. Rather than close your business because it is drowning in debt, consider debt consolidation as a solution to regaining control of your business finances. As the business owner, business debt consolidation requires you to take steps that are similar to ones you take in a personal debt consolidation but, instead, focuses on business debt instead of your personal debt.
Steps to Business Debt Consolidation
The first place to start with a debt consolidation for your business is to compile all of your business credit card and bill statements. Gathering all of the information together helps you to gain a full understanding of how much debt the business is in. Once you have the information together, create two piles for the bills and statements. Mark one pile “good debt” and the other pile “bad debt.” Good debt is tax-deductible debt. For example, a mortgage on the business property your business occupies is generally a good debt because the interest portion of the mortgage is tax deductible. High interest rate business credit card debt, on the other hand, is bad debt because this interest is generally not tax deductible as a business expense. Concentrate on consolidating and paying off your bad debt before the good debt. Once you know which debts you want to consolidate and how much you need to consolidate, you can then review the business debt consolidation options available. The three primary options are a debt consolidation loan, a small business loan, or commercial debt counseling. When comparing your options, consider the interest rates, fees, terms, and conditions of each option, and then choose the solution that works best for your business.
Tips for Business Debt Consolidation
One source for obtaining a debt consolidation loan is from a Small Business Administration (SBA) lender. SBA loans typically offer lower interest rates than other debt consolidation loans. Also, make sure that the debt consolidation loan term doesn’t simply extend the number of years you have to pay off the debt since this simply requires you to pay more in the long-run. You can apply for a small business loan from a private or commercial lender or seek the help of a commercial debt counseling agency to create a debt consolidation plan for your business and then help you to implement the plan.