Debt consolidation is one of the most well-known techniques of debt relief that all kinds of business owners should know about. Since consolidation merges multiple debts into one large borrowing and businesses have to depend on several lenders, it is an often used technique by business owners.
Although debt consolidation helps to wipe out multiple lenders who make it easier to manage debts, the other attractions are lowering of interest and reducing the outflow of funds towards monthly payments. Besides the most visible benefits, there are many more attractions in consolidating debts.
Ongoing businesses may have the requirement of infusing working capital that would be required in addition to the existing capital, and through debt consolidation, it is possible to borrow that money.
When to consolidate debts is an essential decision that business owners have to take after considering a lot of factors and it does not depend only on the quantum of loan debts they carry and the number of lenders.
The business situation has to be conducive for consolidating debts otherwise the effort will not give the desired results. You have to assess the situation and circumstances correctly to determine if it is the right time to think about consolidation.
To know if it is time to go ahead, you have to consider some factors like the terms of your existing debts, your credit and the current financial status of your business. Debt consolidation has to part of your overall financial planning and should help achieve some financial goals because it gives an opportunity of re-organizing your finances.
It might seem that debt management is the primary consideration that triggers consolidation, but it is not always the case. It might also happen that despite being comfortable with debts, you might still seek consolidation because you want to derive some financial advantages from it.
Whatever may be the reason for consolidation; you have to decide from a broader business perspective and must time it right. In addition, you should have knowledge about which kind of debt consolidation loan gives the longest repayment terms and the best interest rates. However, a smarter way to handle consolidation is to seek guidance from the experts at National Debt Relief by logging on to the website Nationaldebtrelief.com.
How to know the right time
Although you might be thinking about debt consolidation loan for your business, to determine the right time for taking the action you have to look at some events that positively impact your personal as well as business credit profile.
Since your target is to lower interest, enjoy longer payment terms and better repayment schedules you should bring the issue of consolidation to the table when things are in your favor. It would place you in a commanding position that should help to negotiate things in your favor in a much better way.
Typically, there are two defined moments for consolidating debts. The first is if you had taken a short-term loan when you had a good credit score because you needed quick money to turn around. In such case, you can proceed for a consolidation loan without any second thought.
The second scenario could be that you had been compelled to take a short-term loan at a time when your financial status did not allow you to avail anything better. In this case, you have to wait for two-three months to generate positive revenue trends and then apply for a consolidation loan with the hope of better chances of approval.
Except for the above two scenarios, you should always think about consolidation when the going is good, and you enjoy a favorable financial status that gives opportunities of striking better deals in availing consolidation loans. Below are some situations that tell you it is time to go for debt consolidation.
Improved Personal Credit Score
If you are passing through a time when your own credit score has significantly improved since the time you had borrowed last, then the time is right for you to seek consolidation loan.
Only if there is a significant improvement that the improved credit score will help to fetch longer repayment terms and lower interest rates.
Your credit history is as much important as your credit score to qualify for consolidation loans because events like repossessions, tax liens, and bankruptcies can debar you from availing consolidation loans.
Improved Business Credit Profile
When you have something to boast about your business credit profile, it demonstrates how much responsibly you have handled your business finances, and it gives confidence to lenders who would be willing to offer a consolidation loan.
The positive credit profile shows that your debts are always within your control and you do not borrow more than your repaying capacity.
Moreover, you are perhaps not utilizing the credit lines to the fullest. The better you perform on these parameters, better will be the credit profile and even better will be the prospects of availing consolidation loans at favorable terms.
Improvement in Personal Finances
Business consolidation loans often require that business owners themselves turn guarantor for the credit given to them. It means that their personal financial health has to be commendable.
It would give confidence to lenders that should your business fail to make payments for the loan; at least the owner can take responsibility for paying it. The personal financial credentials would make it easy to convince lenders to offer the loan.
Improvement in Business Finances
The best time to seek a consolidation loan is when your business is going through a phase of positive trends. When revenue and profitability figures are impressive, it paves the way for negotiating well for consolidation loans that should help to reinforce the business finances. Positive business performance is what impresses lenders the most.
The age of your business is a factor that lenders consider for giving consolidation loans. As the business grows older, the opportunities for seeking debt relief also increase. To qualify for an SBA loan, your company has to be at least two years old excluding any idle time that it has gone through.