Debt consolidation is a form of refinancing that is primarily intended to streamline loan payments. As a business owner, you’re probably aware of how hectic things can become when you have multiple loans out for things such as equipment financing, payroll, utilities, etc.
By combining these loans into a single one, your business debt becomes much more manageable. Oftentimes, you can get the interest rate payments reduced, as well – although this, of course, leads to you paying more (usually) in the long run.
Factors That Improve Your Interest Rate
A successful debt consolidation rests on several conditions; to the extent that this is feasible, you should try and improve the following metrics before you take out a loan. Doing so will give you the best terms:
How Long You’ve Been in Business. By presenting a long track record in the business sector in question, your loan terms are likely to be more favorable. The lender will have confidence in your ability to make payments, and your creditworthiness is improved.
Your FICO Score. This is, of course, your personal credit score. As with any loan, the higher this is, the better – you will want as a favorable an interest rate payment as possible, in order to free up cash for other aspects of your business.
Is Your Business Profitable Yet? It’s always better to have a net profit before you consider debt consolidation; there’s a directly proportional relationship between any recent improvements in cash flow, and the interest rates to which you have access.
How to Obtain a Debt Consolidation Loan
Although any size business can procure a loan to help with business debt, small businesses have an especially robust range of options. You can seek out your bank for one, or check out the federal government’s website for the SBA loan program. If you need help navigating the spate of online lenders, let the finance experts at Lionheart Commercial Capital navigate these waters for you – send us an email or give us a call.