When you operate a small business, cash flow always impacts what you do. Every decision you make for the present and the future depends on what you can afford. So, before you can even begin to think about your five-year plan you need to effectively manage your debt. If you are making payments on multiple high-interest loans, your cash flow can get messy in a hurry. This is where business loan consolidation can help. By combining your loan payments into a single, manageable amount, you give yourself more freedom to build and improve your business.
Boost Your Immediate Picture
One immediate benefit to a business loan consolidation comes with getting cash up front on the new loan. If you are scrambling to get needed equipment or make payroll, a quick cash infusion provides a lifeline for the short term. The boost to your bank account can quickly take you from struggling through the month to moving forward.
Cash flows both ways, of course. A business loan consolidation can also help in the current moment by delaying payment on the multiple loans you currently have. Once you consolidate, those obligations get replaced by a single payment that often does not begin right away. You therefore get the benefit of putting off payments that would otherwise reduce your available cash this month.
Reduce Your Monthly Payments
A business loan consolidation does not just patch up a current cash flow problem. It also helps you improve your financial picture going forward. If you can get a single payment to replace multiple payments, you simplify your life immensely. It gives you one payment to plan and track, and when you are working to navigate everything else that goes into running your business, this can help you manage your finances more easily and conveniently. If you need to make adjustments or work with the payment timing, you only have one lender to deal with, instead of several. You save time and stress by streamlining your loan package.
Part of the problem that multiple loans create comes with the overall amount of money you have to pay out. When you take out loans piecemeal, you're typically just thinking in terms of the current need and the ability to pay back that particular loan; but as you continue to take more loans, the total you have to pay each month can get out of hand. Consolidating usually gives you the opportunity to lower your overall cash outlay for your loans. It gives you a course correction that helps you move forward with a clearer financial picture and a lower total payment obligation.
Lower Your Interest
Finally, a business loan consolidation usually allows you to achieve a lower interest rate than you had on each of your individual loans. This is critical because it means more of the payment you make goes toward reducing your principal balance, instead of simply paying a lot of interest without cutting into what you still owe. When each payment drives down your debt, you gain both a psychological and a real benefit with every payment.
A single loan that reduces your balances gives more than peace of mind, though. It also gives you a path to quickly improve your credit picture. Many entrepreneurs start with dreams that do not match their credit scores or bank accounts, and high-interest loans are a price you pay for that. When you reduce both the number of accounts and your overall balance, while making all of your payments on time, your credit score climbs. You gain the ability to borrow more and to pay less when you do so. Combined, this gives you a recipe for business growth.
A Step Toward Better Financial Management
Running a small business is already a risky endeavor. You count on your ideas and your abilities to help you succeed against larger, more established competitors, and you make moves that depend on your ability to achieve what you believe. When those moves include high-interest loans, you can get your business stuck in a debt cycle that becomes one more obstacle to your success.
If this is impacting you, a business loan consolidation may give you the boost you need. It frees you to shore up your current finances and move forward in ways that both protect your money and grow your business. If you are ready to see whether a business loan consolidation is the right move for you, contact Kenmore Capital today to learn more.