Running a small business is virtually impossible without taking on debt in some form or the other by the owner. In an ideal world, the cash flow of the business should be able to pay for all the expenses. However, since the world is far from ideal, much of the expenses, at least in the initial stages, have to be met by using credit cards and small business loans for working capital as well as to fund growth. When you find yourself scrabbling around for money every month to fulfill your debt repayment obligations and find yourself sinking into the morass of a debt trap, it is perhaps the time that you initiated affirmative action to reverse the process, regain financial freedom, and start growing your business once again. While there are many ways of restructuring business finance, one of the simplest is small business debt consolidation. Find out what you can do and what are the pros and cons of each method:

Understanding Business Debt Consolidation

Business debt consolidation involves combining multiple debts into one so that instead of having to monitor and pay a large number of lenders, you can just pay one lender once every month. It is quite possible to refinance debts without consolidating them, however, consolidation reduces the effort of managing debt and because the sum is higher, you can often get better rates and terms.

Benefits of Business Loan Consolidation 

There are quite a few advantages of consolidating business debt; some of the prime ones being:

Reduced Interest Rates and Fees

According to, that quotes a report by, the average rate of interest on credit cards is at a high of 17.41%, climbing up from 16.5% one year ago, and 15.225, two years back. You can use debt consolidation as a calculated strategy to save money by reducing your rate of interest. The high-interest loans that you had possibly been forced to take on due to compulsions of business can be substituted with a loan carrying a lower coupon rate as well as lower fees that can reduce your cost of capital, ease the pressure on the cash flow, and make the loan servicing more affordable. Businesses have long been refinancing loans as a matter of course, consolidation just takes it one step further by reducing the number of loans to just one making it easier to keep track of and manage. Debt consolidation can be a lifesaver for your business if it has chalked up multiple high-cost debts.

Rescheduling the Repayment 

When you arean entrepreneur, life can be hectic because you are fighting on many fronts at the same time trying to breathe life into your business and make it really big. While you may have taken on multiple debts to finance your business, it can be a real pain trying to remember the payment schedule because some require weekly payments while others monthly and all the credit cards anyway have different due dates. By undertaking debt consolidation, you can end up with only one monthly repayment date to keep in mind. Also, you can take advantage of the consolidation loan from a reputed company like NationaldebtRelief to cover for short-term loans as well as credit card balances to a loan with a longer tenor that will not only extend the repayment schedulebut also make the repayment more affordable.

Improvement in the Cash Flow

For a business to achieve financial stability and rapid growth, the most crucial factor ishealthy cash flow. It is the cash generated by the business that allows it to buy its raw materials and pay wages not profits. While profits are certainly a very important source of funds for business expansion, it is only with cash that the operational expenses can be met. It is possible for a business to carry on operations indefinitely if there is no shortage of cash, however, when cash falls short, it can mean the end of business even if as a venture it is hugely profitable. Because debt consolidation reduces the interest expense and the overall cost of borrowing while a tenor restructuring can lower the monthly payment, the cash flow can be significantly boosted. This can then be invested right back into the business operations to make it grow faster or even retire the debt more quickly.

Types of Loans Available to Businesses for Consolidating Debts 

Bank loans: Typically, businesses have looked to bank loans to consolidate their debts, however, this method only works if the business has been operational for some time and has built up a stable relationship with the bank. Banks are generally very finicky and have a protracted and bureaucratic process but you can get very low rates of interest and long tenors to pay off the loan. To be successful, you need a stable cash flow for at least a couple of years and a credit score of at least 700.

SBA Loans: If you cannot manage to get a bank loan, you could try to get an SBA 7(a) loan to consolidate your debts. According to, SBA loans are easier to get than bank loans because the government partially guarantees them taking the pressure off the lenders. You can get a maximum of $5 million for up to 25 years. The rate of interest is relatively lower than commercial loans but you must have a credit score of at least 600, stable operations, and a track record of at least two years.

Private lenders: If you have no time or inclination to get qualified for a bank or SBA loan, there are plenty of private lenders that can disburse a consolidation loan in no time at all. Many of the online lenders do everything over the web and accord approvals in just a few days. The more stable the business and better the credit score, the easier the terms and rates of interest.


Debt consolidation can be a smart move to get your business finances in better shape. You will not have to worry about missing the payment dates of different creditors any longer but can focus on repaying only one loan with a fixed EMI payable on a fixed date every month. The reduced rate of interest and better terms will ease the pressure on the cash flow and allow the savings to be plowed back for business expansion. Finding a reputable lender with the best offer is the most critical aspect.


Leave a Reply

Your email address will not be published. Required fields are marked *