Arizona Tribune - BHG - Clean Up Business Debt: Consolidation Loans Explained

To save money on monthly interest payments: When a business has accumulated a lot of debt from various lenders, it might be shelling out a significant amount of money each month just in interest payments. Consolidating from many loans to a single loan can potentially save money on interest and decrease the amount paid each month toward debt.

To make business financial management simpler: Each employee in a small business typically wears multiple hats. If a company doesn't have a dedicated bookkeeper, it could present a challenge for an already overburdened employee to balance the books. Consolidating debt into a single loan can make business financials easier to manage, especially when it comes to tracking how much the company is paying toward debt each month.

Loan term: The loan term dictates how many years a business will pay the balance. Some companies offer loan terms of up to ten or more years, giving better flexibility with how much a business can pay each month.

Interest rate: A business owner may be able to check available interest rates with a lender by prequalifying for a loan. Prequalification won't impact the business credit score and can help someone compare interest rates across lenders.

Fees: Many lenders charge a certain percentage of the loan amount as an origination fee. But it's also important to understand if there are any fees for early repayment or late payments.

How quickly a company can access the loan: If a business gets in a bind and other debtors are knocking down the door for their money, it may need access to the loan balance quickly. It's important to understand the funding timeline for various lenders. Some lenders may be able to get the creditors the funds in a matter of business days, while others may have a lengthier approval and funding process. 

Collateral requirements: Many debt consolidation loans are unsecured, meaning the lender won't require any collateral to back the loan. However, some lenders may want to secure the loan using business equipment, real estate, or a personal guarantee. An owner will want to be sure to understand collateral requirements before applying to avoid surprises or changes to the interest rate later.