If you do not have your finances in order, your business can drown faster than the Titanic. Many business owners think of giving up as the letters from their creditors pile high on their desks. However, the smart survivors know how to treat this as just another glitch and move on. This will be possible for your business too if you know about debt consolidation loans. Five steps to get a consolidation loan for your business.
How to get debt consolidation loan for your business?
Debt consolidation is one of the best ways to restore health to your business finances and enter the market with renewed gusto. Consolidating your loansis a delicate subject, and you need to do it right for helping your business.
Let us check out the fiveinitial steps for planning a business debt consolidation loan.
1. Check your bills and loans –
To understand how much help your business needs, you need a reality check. We know how hard it can be to go back and dig out due slips and bounced check notifications. These are a few unpleasant tasks that you need to get over with before we can move on to the brighter part. Pull together all your credit card bills and debt statements before you assume how many loans you need.
2. Categorize your debt –
Once you have pulled out the loan documents, this step will become so much easier. Some companies have a lot of small debts here and there. These companies usually need a smaller loan amount to pay off all their debts. Then some companies owe thousands of dollars to banks, credit card corporations and private loan sharks. These companies need more financial help. The loans for these businesses are different – they are larger and bear different repayment terms. Find out which category your business falls in. Then review your repayment terms and see which loans need an immediate refund and which ones you can put off until later.
3. Check your credit score –
You can get one free credit check from each registered and genuine credit company in the US. Utilize this opportunity to stay on top of your credit history and trends. You can also purchase a copy of your FICO score (this should be a three-digit number, between 300 and 850).Usually, if you have a credit record of 720 and above, you will find it a lot easier to borrow the consolidation loan amount from national banks, private banks, and credit unions. Since you are already looking at debt consolidation options, we can assume that your credit scores have taken a hit. In that case, if you have a credit score below 600, your plausible options for a new loan include online loan companies and private lenders.
4. Compare and consider –
Once you are done with the categorization process, start looking into your options. You will likely have private lending companies and specialized business loan companies in hand. Start with checking their online reviews. First, check what the reviews on their websites mean. Then move on to registered business websites like Yelp and Better Business Bureau for more business details. If you are looking towards lending a significant sum, talk to clients from the company’s client list. Always remember, a genuine company with successful business will have a well-designed and informative website. If you have bad “intuitions” about a company, do not get into an agreement with them. Plenty of companies offers business loans to small businesses, startups and new ventures. You will find more options that will suit your needs.
5. Obtain the loan from a lender –
This step is the most exhilarating for any business that has been hiccupping for a while. You can spend the money to pay off all your debts, the interests and invest the leftovers in new projects. All businesses must remember that a consolidation loan is a temporary respite. It is not a destination or a solution. You will have to pay the consolidation loan company as well. Although, the payment terms will be different from the multiple payment terms you have been dealing with. For example – you may be dealing with a loan that is for four years. The new consolidation loan can stretch it to 7 or 8 years, but at the end of that term, you need to be able to pay it off completely. Otherwise, you will end up on a loan treadmill that will keep increasing your payments and net debt amount year after year.
Five steps to get a consolidation loan for your business
The best way to overcome your financial crises is to seek help from a company that offers both consolidation loans and debt counseling. Business debt advice is a lot different from personal credit/debt counseling. Therefore, always remember to find a company that specializes in helping businesses during tough finances.
What should you expect from your consolidation loan?
Immediate business resuscitation is one aspect of getting a good consolidation loan. It should provide at least one avenue to invest in new projects that will improve your business prospects.
You should walk away with a better FICO score and the end of the whole process. Once you manage to pay all your creditors back, your credit score should significantly improve. Then you can gradually use the revenue from your new projects to pay the consolidation loan company back in small and steady installments.
What’s the take-home message?
A consolidation loan is a smart solution for businesses that are going through a financial crisis. You need to be careful while picking a company. More big lenders that give out loans to companies with less-than-impressive credit records tend to charge a higher interest rate. However, they also provide an added security new business loan companies can never provide.