Small businesses often have to take on a considerable debt load as part of their initial financing. Getting a small business off the ground is no small task, after all. Between investing in office space, equipment, personnel, inventory, and so on, it all adds up fast, before a single dollar starts coming through the door in terms of revenue.
Likewise, rapid expansion or seizing business growth opportunities often requires small business funding and financing. Before you know it, you can be responsible for a sizable debt load for your small business.
The interest payments can start to add up, and soon all of your profits are being eaten by debt service. In these instances, small business owners may turn to business debt consolidation and/or refinancing services in order to ease their debt load, and make paying off their debts more affordable.
In this guide, we’ll explain the differences between business debt consolidation and debt refinancing, highlight the benefits of debt consolidation, and list off several debt consolidation and refinancing companies that work with small businesses.
By utilizing one of these companies and their services, small business owners can gain valuable working capital for your business, improve revenue and profits, and make business finances more manageable.
What’s more, debt consolidation loans for poor credit customers are available from many of these companies, meaning even if your credit is not so great, you can benefit from using these services. Read on to learn more!
Debt Consolidation, Debt Refinancing, or Both?
First, it’s important to understand the difference between debt consolidation and debt refinancing, as they are two different processes. Debt consolidation is focused on paying off existing debts, and bundling them all together, under the auspices or umbrella of a new, single debt consolidation loan.
In most cases, this can involve a lower interest rate, but that is not a requirement of the process. The savings and benefits can be found in reduced service fees, easier servicing (a single loan vs. may), and some potential positive effects on your credit score.
Debt refinancing, on the other hand, does not consolidate debts into a single loan or debt instrument. Rather, all the outstanding loans, lines of credit, and other small business funding sources that you have are left intact. Simply, the interest rates on these credit products are reduced, meaning you pay less each period going forward.
Depending on when you take out a debt consolidation loan, however, you may be able to kill two birds with one stone – consolidate your debts into a single loan, and enjoy the benefits of a lower interest rate than you were paying on the constituent parts of the debt prior to business debt consolidation.
Traditionally, refinancing was a bit of a challenge for small businesses, as there weren’t a ton of options available on the market. This was especially true when seeking debt consolidation loans for poor credit businesses.
Fortunately, however, the last decade or so have seen rapid changes in the financial services market, with more and more non-bank lenders and firms available to help small businesses with their small business funding and business debt consolidation needs.
The Benefits of Business Debt Consolidation
Business debt consolidation is all about making your debt more manageable, saving you time and, ultimately, money. Principally, business debt consolidation can help in the following ways:
- By consolidating debts into a single debt instrument, multiple servicers or lenders are cut out of the picture. Those debts are paid off, and you only have to deal with a single loan servicer (the provider of your debt consolidation loan) moving forward. This can save you a lot of time, hassle, and money, in the form of service fees and surcharges.
- If you are fortunate enough to be able to get a debt consolidation loan at a lower rate than some or all of your outstanding debts, then you will ultimately end up paying less in interest over the life of the debt. This is the principal benefit of debt refinancing, but is also available when a debt consolidation loan is taken out at a lower interest rate than existing debt.
- Debt consolidation can often improve credit scores. By paying off existing debts, and taking out a single new debt instrument – even though the amounts total to the same thing – your credit profile may be updated to show payoff of existing loans and lines of credit successfully, thus improving your credit score.
- In some cases, business debt consolidation can also benefit your business by making it easier to access other forms of credit and small business loans. Because you’ve taken proactive steps to manage your debt load, many lenders will be more likely to work with you on issuing new lines of credit, loans, and other small business funding
Debt Consolidation and Refinancing Companies
If by now you are sold on the concept and benefits of debt consolidation and debt refinancing, you may be wondering what companies or services are available, and which you should choose to see the process through.
While availability and criteria will vary from company to company, based on your own small business’ history and debt/revenue/credit situation, we’ve highlighted five different options of companies to choose from below.
These are some of the best small business funding, financing, and debt consolidation companies around today. As always, we highly recommend checking out the individual websites of these companies for the latest application and eligibility requirements, as information can change (though all of the information we’ve included below is current as of the time of publication of this guide).
Fundation
Fundation offers debt consolidation and similar small business loans ranging in size from $20k to $500k, with an interest rate of 8 to 30% depending on the particulars of your business, credit score, loan size, and so on.
Minimum annual revenue of $100k, and at least 3 employees is required. This makes them ideal for small businesses that are on the larger end of the spectrum, and fairly well-established, rather than new start-ups.
SmartBiz
SmartBiz offers small business loans of up to 10 years in term, backed by the US Small Business Administration. As such, there’s a lot of paperwork, and reasonable revenue/time-in-business requirements. But the reward is fairly low interest-rates, on the order of 7-8% in many cases.
If you don’t need the debt consolidation help as quickly, and are looking for a longer repayment option and aren’t averse to paperwork, then this might be a good choice for your business.
Funding Circle
Funding Circle is also aimed at more established small businesses, with small business funding from $25k to $500k, and interest rates averaging between 8% and 33%. Funding typically takes about 10 days, and loans can range from 1 to 5 years in term.
While they aren’t specifically debt consolidation loans, there aren’t restrictions on use, so using them to pay off higher interest rate loan and credit products is perfectly acceptable.
DealStruck
For truly small and new small businesses, DealStruck might be an ideal choice. A 1 year-in-business requirement is pretty much the basis for a small business loan here.
However, interest rates are generally a bit higher than some of the competition, ranging from 10% to 28%. Loans can last as little as 6 months to as much as 4 years, and funding takes about 10 days. Loans of between $50k and $500k are available.
BizFly Funding
BizFly Funding offers small business funding solutions for small businesses of all sizes, types, and maturities. With a full range of different financing options, including debt consolidation loans, lines of credit, small business loans, merchant cash advance loans, and more, there’s something for everyone here.
The exact requirements for a debt consolidation loan, and the resulting loan term, amount, and interest rate are all evaluated on an individual company basis, to maximize the benefit for small businesses looking for debt consolidation help.
The application process is quick and online, and upon approval, funds are usually available within 1 business day. Other small business funding options from BizFly Funding can provide as much as $1m in benefits, with relatively low credit score, revenue, and time-in-business requirements.