Small business owners often find themselves stuck. To get off the ground, you need capital, and then you need more to do the marketing and legwork to get to the point of making a profit. If you're coming in with ideas bigger than your bank account, this typically means getting loans. One loan gets you far enough to need another, both to gain more access to funds and to make payments on the first one.
Once you're stuck with multiple business loans, it can be hard to find a way out. There are different paths to business loan consolidation that can help. All small businesses are not created equal, though, and neither are your needs. Read on to find the three best ways to get out from under multiple business loans.
1. Refinance with Better Terms
One problem you may face with your current loans goes beyond the number of loans you have. When you take out loans before you establish your business, getting the best terms for those loans can be tricky. High interest payments make it incredibly hard to get out from under them, so you end up paying back what you borrowed many times over. When you stack loans to keep from falling behind, you dig a pit that just gets harder to escape.
The good news is that you can refinance. As your business grows, you improve both your credit profile and the value your business presents to lenders. Business loan consolidation gives you a way to combine the higher-interest loans into a more manageable payment, both in terms of the number of payments you make and the amount you are paying back.
2. Take a Reverse Consolidation Loan
In addition to traditional business loan consolidation, you can take on a reverse consolidation loan. This does not replace the loans you have, but rather gives you another source of revenue to pay off your current loans. It funds you in weekly payments that cover the payments you have to make, and itself has lower payments than what you are making currently.
You need to make sure that a reverse consolidation loan does not run afoul of the terms of your current loans. In addition, using this for your business loan consolidation strategy requires a level of discipline to keep from turning replacement debt into extra debt. If you have reached a level of business growth where all you need is help meeting your loan payments, though, it can be a great credit tool that helps you get out from under the stacked loans you have.
3. Use a Revolving Credit Line
Finally, one tool you can use as you get established is a revolving line of credit. This gives you ongoing access to funds if you need to make purchases without going through repeated loan processes. You can use this line to pay down other debts while maintaining access to emergency funds. In the meantime, you can build your credit up both with regular payments and with the reduction of your current loan debt.
Revolving debt can create the same temptations as ready access to smaller loans. It is not a business loan consolidation tool like the other options, but instead gives you flexibility in managing your business finances without having to panic at every unexpected expense. If you use it carefully and responsibly, it can give you options at the times you need them most.
Managing Your Debt Cycle
Whether you are a consumer or a business owner, you know that getting into debt is much easier than getting out of it. Business loan consolidation and other credit tools available do not take the place of working to get out of debt. Rather, they provide a way to both reward the work you have done to build your business and help you benefit more from the revenue you generate. They give a way out when you feel like you are only working to pay someone else.
At Kenmore Capital, we want to help small businesses find the financing options they need. If you have been working around the clock just to survive, business loan consolidation can give you the opportunity you need to thrive. Whatever your financial situation, we can help identify the right financing options to get you out from under your old debt, and send more of your business revenue through to your bottom line. If you are buried under stacked business loans, contact us today to find a better way forward.