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Small Business Debt Consolidation - How To Decide Whether Small Business Debt Consolidation Is Right For You

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What Is A Small Business Debt Consolidation Loan

In a small business debt consolidation loan, all of your existing small business debt to all your various lenders is consolidated into a single loan owed to a single lender.

Why Get A Small Business Debt Consolidation Loan

There are two primary reasons why small business owners consolidate their debt into a single loan: to pay a lower monthly payment and to extend their repayment period.

Under a small business debt consolidation loan you make a single monthly payment to this new consolidated lender which is significantly smaller than the cumulative payments you previously had been making to each individual lender. That translates to more money in your pocket at the end of each month to reinvest in your small business.

The other benefit of small business debt consolidation, extending your repayment period, can be a lifesaver when the term on your small business debt is expiring and you have a balance due that you can’t afford. Rather than face imminent penalties, not to mention damage to your small business credit rating, extending the repayment period is a welcome reprieve.

How Small Business Debt Consolidation Loans Work

There is however a trade-off to consolidating small business debt this way. By extending the length of time you have to pay back your consolidated small business loan, you tack more months onto your repayment schedule, which means more monthly payment. So the savings and freedom from default that a small business debt consolidation loan gives you now comes back in a larger cumulative total amount that you pay for the loan over the long-term.

Still, if you’re strapped and struggling now, then you’ll want to do what it takes to make sure you even have a small business still operating in the long-term. Of course if you have the ability to meet your current small business debt payment agreements and you only have a few years left before your loans are paid off, you may want to rethink applying for a consolidated loan just to have more money in your pocket now. Just think carefully about the debt you’ll be incurring down the line for the few dollars you might save in the short term. If you can afford to avoid small business debt consolidation, then you may want to give serious consideration to the reality that it may be in your best interest to do so.

The Wisest Small Business Debt Advice

The wisest business move you’ll ever make could be to avoid getting into small business dept in the first place. One of business icon Warren Buffet’s “10 Ways to Get Rich” is to limit how much small business debt you take on in the first place. He warns that operating your business with borrowed money won’t make anyone rich. Mr. Buffett did not build his empire borrowed funds. On the contrary he avoided borrowing money at all costs. He has been known to point out that many people have written him very emotional letters over the years with heartbreaking stories of small business debt disasters that they had gotten themselves into by thinking that they could manage it. Better, Warren says, not to put yourself in the position of having to manage small business debt in the first place.

If it’s come to this point for you with your small business debt as well, then it may be time to avail yourself of a small business debt consolidation loan—it could be the one business move you make today that saves your small business for a brighter tomorrow.

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