No one goes into business with a plan to build out a portfolio of debt. When you need capital, though, you probably need to take on loans--loans that, because you're either new in business or have experienced some hard times, often come with unfavorable terms. You need money to make money, so you take them on, only to discover that your interest is keeping up with the increased business, leaving you fighting to survive. At this point, taking on more debt seems like exactly the wrong approach. Still, you are strapped for cash, and need a boost to get out of your debt cycle. If this describes you all too well, you should know that there are ways out. The best small business loans and debt solutions give you a path forward with more money left on your bottom line.
Consider a Consolidation Loan
If you have several smaller loans on the books, they hit like a series of body blows. None of them provides a knockout punch individually; each one may even seem manageable. When you keep paying them, though, one after another and month after month, they have a way of taking the fight out of you. You look at them together, and all of that debt leaves you without a lot left, and discouraged every time you increase your sales without a corresponding improvement to your bottom line.
Businesses in this position may find that their best strategy are larger consolidation loans. This kind of loan takes the place of your higher interest debt and rolls it into a single, more manageable payment. Each payment not only takes a smaller bite than the combined loan payments it replaces, but with a lower interest rate, it reduces your debt faster as well.
An often useful variation of the consolidation loan is a reverse consolidation. This type of financing deposits into your bank account each week the exact amount needed to cover that week's payments on your existing loans. The payment for the reverse consolidation is substantially less than the combined total payment for your existing loans. In essence, you're trading several payments, which taken together equal a large, burdensome amount, for one payment that's much lower. Your relief is immediate and substantial. The weekly deposit amounts get smaller as each of your exising loans become paid in full. Keep in mind that generally reverse consolidations only work if the remaining terms on your existing loans are no longer than five months.
Refinance Your Current Loans
If you don't have a large number of loans, you may want to look at simply refinancing the loans you have for better terms. An owner just launching or who has had credit problems will seldom qualify for the very best small business loans. When you have to borrow, you do so at the rates lenders give to unproven entrepreneurs. It puts you in a hole you need to dig out of before you can start to see a profit.
Instead of holding on to high interest debt, you can use your more developed business or improved credit profile to refinance. As you start getting regular customers and building a steady revenue stream or see your credit score climb, you'll be in position to qualify for much better financing: loans with more cash available, lower interest rates, or both.
Even if you don't want to carry more debt, simply refinancing your balance at more favorable terms can give you a huge lift and leave more of your revenue in the bank.
Move Forward with a Merchant Cash Advance
But what if you don't want your loans anymore at all? For some, replacing a loan with another, even if you do qualify for the best small business loans, leaves a sick feeling in your stomach. Good terms or not, it's debt that you have to keep paying off--and if your cash flow isn't steady yet, that layer of stress can keep you up at night.
An alternative solution in this situation is a merchant cash advance. Unlike loans that carry set payments every month, a merchant cash advance puts money in your account that you pay back based on a percentage of your revenues. This flexibility offers options to get you out of debt and keep your payments on a manageable schedule, regardless of the fluctuations your business faces.
At Kenmore Capital, we understand that small businesses do not come as one size fits all. As a result, the best small business loans will vary from one business owner to another. Instead of serving up stock solutions, we start by listening and assessing your unique situation. No judgment and no pre-determined solution to new problems. If you need a financial solution designed for you, contact us today to learn how we can help.