62% of the total successful ventures despise taking loans because they do not want to be in debt, as Entrepreneur.com states.
Debt consolidation loans are capable of lowering the rate of interest as well as reducing the size of the monthly payments that a business has to pay to the creditors to whom they owe money.
Chances are that they can also borrow working capital, which is important for the business.
Having knowledge about when it is ideal to consolidate all the business debts is definitely important but it is dependent on the various terms as well as conditions of the existing debt amounts, the finances of your business, and the personal credit.
Getting a debt consolidation loan for your small business
You will get to know when it is ideal and the time that is appropriate for consolidating the entire debt amount.
If you are consolidating your loan at a proper time, you are not only going to get a low rate of interest, but also a better schedule of repayment as well as long terms.
However, if you decide to consolidate all your loans at an improper time, it can not only damage the credit score but it is also going to hurt the ability to borrow money for further business aspects in your future.
Until and unless you have decided to consolidate a loan that you had taken out for the sake of expediency, you should only be consolidating the debt if you are an ideal applicant of a loan in comparison to what you were earlier.
There are numerous ways of accomplishing this. Given below is a list of the ways that you should have knowledge about.
Improving the credit score
If you see that the personal credit score has seen a lot of improvement since the time you have borrowed money, it is a good and ideal time of consolidating the business debt.
When your credit score improves, it is considered to be one of the most important qualifications for getting a low rate of interest as well as a long repayment term.
You need to understand that the credit score can be improved but if it only improves by a few points; your business is not going to qualify for better loans. The reason behind this is that the increase requires being visible.
Moreover, irrespective of the improvements in the credit score, the diverse negative credits that include bankruptcies, repossessions, tax liens, etc., can also make it extremely difficult to qualify for the debt consolidation loans.
If you are interested in consolidating only a tiny portion of the entire debt amount, you can consider the credit cards as well. It is simple and easy to get hold of a credit card. A business credit card is going to be the only option that has a 0% interest rate, though it is going to last for only a small period.
The credit profile of your business has seen improvement
If the credit profile of the business shows improvement, it means that you are becoming a responsible borrower with each passing day. This also means that you are not having more amounts of debt than what you are capable of handling.
It also depicts that the business is not making use of the entire value of the credit lines that are available. If improvements are observed in both the areas, you are going to be an ideal candidate for consolidating the business debt.
- An ideal credit profile of a business is generally going to have the following.
- Timely payment history.
- Reporting of multiple companies.
- No errors in reporting.
- A huge percentage of credit lines available, which are not being used by you.
- No repossessions, bankruptcies, or tax liens.
Having a proper understanding of the credit report of your business, how it is working, and the manner in which you will be able to build the business credit is considered to be extremely daunting.
However, it is one of the most important skills to manage especially if you are struggling with a huge amount of debt. In this case, checking the credit score is your preliminary step.
There have been improvements in the personal finance
As the owner of a business venture, the health of your personal finance is as crucial as the health of the finances of your business. The reason behind this is you may have to guarantee the business consolidation loans personally.
The lender has to remain confident that if the business venture is not capable of making the payments, you are going to step in, know about the total amount that is due, and clear the payments.
Given below is a list of the ways in which the personal finance that you have can show improvement.
- Increasing your income.
- Various other income sources.
- A reduction of your withstanding debt.
- Necessary expenses reduced or fewer dependents.
Any sign of improvement observed within the personal finances that you have is going to increase the chance of qualifying for the consolidation loans that have better interest rates, convenient schedules of repayment, as well as long repayment terms.
It is also crucial that you keep checking the personal credit score so that you are capable of hitting the requirements for getting a debt consolidation loan. You can visit NationalDebtReliefPrograms to know more.
The finances of the business have seen improvement:
The best thing that you can do is approach your lender about consolidating the business loans when you observe an improvement in the business finances.
The ability to qualify for the better terms of financing can improve quickly especially if your business has a successful quarter or a year.
Whenever your business is accomplishing a significant objective, you can start thinking about whether you should be consolidating the loans or not.
Anything and everything that can be done for painting upward swings in the business revenue is going to be beneficial for getting a debt consolidation loan.
Opting for a debt consolidation loan is not enough. It is crucial that you know as to when you can consolidate the loans without facing any trouble. Consider the ways that have been listed above and it is going to be easy for you to get a debt consolidation loan.
Kelly Wilson is an experienced and skilled Business Consultant and Financial adviser in the USA. She helps clients both personal and professional in long-term wealth building plans. During her spare time, she loves to write on Business, Finance, Marketing, Social Media. She loves to share her knowledge and Experts tips with her readers.