Here are the main reasons why this option is brilliant.
One of the primary disadvantages to using debt consolidation is that it is a temporary solution to a permanent challenge. Consolidating debts can reduce monthly expenses and lower interest rates; however, this does not change the fact that your company will have more expenses than income.
Small business and large corporations alike often struggle with loan repayments. And while it is not a crime to seek financing to try and expand your business, failure to repay the debts could end up in you losing the business you have worked so hard to build. If you are struggling with high costs and low profits, business debt consolidation could be a good option as opposed to defaulting loans.
Pros and Cons
It is important that you consolidate at the right time to get all the benefits of the consolidation process. You will know if it is the right time to consolidate by events that improve your personal and business credit profiles. It will help you get a better interest rate, longer term, and a better repayment schedule. On the hand, consolidating at the wrong time can damage your credit, waste your time, or get a bad loan - which can have an effect on your borrowings in the long run. Here are the signs that it is a good time to consolidate your loans.
If your personal credit score has improved compared to when you last borrowed money, you should consider consolidating your loans. You can get a lower interest rate and a longer repayment term with an improved credit score. Also, improvements in your business credit show the lender that you are a more responsible borrower. This is a good time to consolidate your current debts.
When looking at these loans, it is important to note that there are secured and unsecured loans. Secured loans will require some form of collateral such as business assets while an unsecured one will not. Secured loans will generally offer lower interest rates because of the collateral they are holding.
Using A Single Creditor
A debt consolidation loan can be obtained from a Small Business Association lending company and is only beneficial if you can obtain an interest rate that is lower than you are currently paying on all your debts combined. It is also beneficial if the loan term does not extend beyond your existing debt terms. For example, if your current debt is scheduled to be paid off in ten years and the debt consolidation loan extends that to fifteen or twenty years, you will end up paying more than you would if you maintained your current payments.