The process of consolidating commercial debts


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Small business cash flow isn’t always constant, whether it’s a startup or you’ve been there for a few years.


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You should always have money to pay for planned and unforeseen expenses, regardless of the cash flow. Things like employee payroll and investing in new equipment can’t wait. In such cases, business loans are the best solution.

But if you got multiple business loans, it means that you will have to pay them individually, don’t forget the installment amount, due dates etc. If you feel that managing all the different loans is getting too difficult for you, then choose an appropriate debt. consolidation loans for your small business can help ease your hassle.

Debt consolidation can be a critical requirement during an unprecedented emergency or economic crisis like that caused by the COVID-19 pandemic, when countless small businesses needed financial assistance to deal with the burden of debt. pending loans that were previously affordable. Debt consolidation loans were among the most sought after loans in August 2020 during the pandemic epidemic in the United States, with nearly 45,600 average searches per month. (Source)

The process of consolidating commercial debts

As the name suggests, debt consolidation loan is a type of loan that allows you to pay off all your debts. The main objective of this loan is to converge all your debts towards a single loan or account, to have only one simplified monthly payment.

  • However, before you take out the consolidation loan, make sure that you get it at the lowest interest rate. Otherwise, you will end up paying a lot more.
  • All of your loans are covered by the Consolidation Loan, otherwise it will be pointless.

Consolidation loan vs refinancing

Often people confuse consolidation loans with refinancing. Even though they are quite similar, they are different too.

  • For refinancing, you will take out one loan at a lower interest rate to pay off the other. You won’t need to have different debts for this one.
  • The main goal of a consolidation loan is to take out a loan at a lower interest rate to pay off all the different types of debt that you have previously incurred. By doing this, you will only pay one monthly payment and you will avoid the hassle of different loans.

If you’ve already been refinancing or consolidating, you can opt for them again at a lower interest rate.

Factors That Help You Get A Business Debt Consolidation Loan

Like any other loan, business consolidation lenders also consider certain factors before the loan occurs. They will check your income, credit score, and various other things before they approve. The factors that will help you with a consolidation loan are:

  • Credit Score – Most lenders prefer to give loans to people with a credit score of 650 or higher. The credit score shows the credibility of the past payments of the loan recipient, including whether they repay on time, the number of loan accounts they have, etc.
  • Initial Consultation- Before obtaining a loan, it is essential to go through an interview process with the underwriting team. The interview is a determining factor in deciding whether to approve the loan.
  • Documentation – Now is the time to submit all your documents such as future sales projections, tax returns, financial statements, balance sheets, etc. to the lender.
  • Review – after submission, they will first review all documents, and if it turns out to be positive, you will receive a prequalification letter with all the loan terms outlined therein.
  • Due diligence – Next comes the authentication process. The lender will check your background based on the information you provided. If you pass this check, they will quickly send you the letter of commitment.
  • Final Steps – Once your lender is satisfied with all of your loan documents, they will sign the business consolidation loan agreement letter.

So, before you apply, make sure all the documents are ready. And never give false information to lenders otherwise your loan application will be rejected during background check.

Opt for a business consolidation loan

The concept of a business consolidation loan sounds attractive and hassle free. You will be able to streamline your loan payments in one place, that too at a lower interest rate. But is it really worth it? Let’s find out.

  • Managing various payments can be a lot of hassle. You will need to remember many due dates, interest rates, balances, etc. Debt consolidation loans make the job much easier. All your payments will be in one account.
  • Who doesn’t want to pay a lower interest rate for their loans? Consolidation loans usually come with a lower interest rate, which means you’ll be able to save more and keep your business cash flow.
  • As you manage your cash flow better with just one loan account, it will increase your credit score – no more missing due dates. It will also increase your credit amount and the possibility of obtaining a loan in the future.

In light of what we’ve mentioned here, it’s worth noting that most lenders need 660 as their lowest credit score and a debt-to-income ratio (DTI) below 45% to be able to earn a ready. Credit scores below 660 mean an exorbitant interest rate, making it financially unnecessary to take out the loan. In the event of bad credit, origination fees of between 1% and 5% are likely to be charged as well as interest rates between 29.95% and 35.99% or more. (Source)

Even though there are many advantages to the consolidation loan, there are also some disadvantages that you should be aware of –

  • There is no guarantee that you will get the loan at a lower rate. If you don’t get a low rate loan, you could end up paying a lot more in the long run. So, before you go for consolidation, you need to make sure that it will benefit you in the future.
  • Remember that the consolidation process involves taking out loans to pay off old loans. This means that your new loan term will start all over again. The total number of years will increase and you could end up paying a lot more. So make sure you have the correct calculations before you decide to go for this one.
  • Consolidation loans might not always be able to solve your cash flow problems. It may be a short term solution, but it will not solve the problem in the long term.


It is never a good decision to burden yourself with more loans. But, if you get the consolidation loan at a lower interest rate, and if it benefits you in the long run, only then should you think about opting for it. You need to think about the long term process and properly analyze your needs before making an informed decision.



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