Small Business Debt Consolidation Strategies

There’s good business debt and bad business debt. Good debt has low rates, long terms and manageable payments. Bad debt, like credit cards or lines of credit, has high rates, short terms and payments that cut into cash flow. If your business is weighed down under bad debt, consider the following financing help for business to reduce that debt and strengthen your bottom line.

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Stop creating debt

An important step when trying to reduce small business debt is to stop creating additional expensive debt. Analyze profits, losses and expenses to determine steps that will help you stay afloat without taking on additional bad debt.


Consolidate debt

According to the Federal Reserve’s Small Business Credit Survey, nearly a quarter of businesses that applied for funding during the second half of 2016 sought to refinance existing debt. The way to do this is to take out one loan and pay off the rest.

It’s important that you get the lowest possible APR when combining business debt into one payment. Look into ant SBA loan with the most competitive rates on the market, a 10-year term, no prepayment penalty and low payments.

SmartBiz Customer Milton Martinez explains how debt consolidation with an SBA loan was the right strategy for his business. “By getting rid of two small loans, I’m saving $15,000 – $18,000. That’s money I can put back into growing my business or into savings.”


Free up revenue

Review current expenses to determine where you can cut back. Are you paying a freelancer or outside firm for services you could handle yourself for less? Bring those services in-house until your debt is under control. Employees working remotely a few days each week can lower your overhead expenses. Look for areas where you can cut back so you’ll have additional funds to pay down debt.


Explore cash infusions

More money coming in means you can pay off debt quicker. If there is equipment or inventory that you’re not using, sell that to another business for a quick cash infusion. Do you have extra room in your office or warehouse? Consider leasing out that space to increase income.


Prioritize your payments

If your debt is spread out over multiple credit cards, focus on paying them off one at a time. There are two ways to do this. You can pay off the card with the highest interest rate first or pay off the credit card with the lowest balance first. Getting rid of the highest interest rate card is the better strategy, as you’ll end up paying less in interest.


Renegotiate debt

Have you tried to simply communicate with your creditors? You might be able to work out a deal with them. You can ask if they can give you an extended loan term to lower monthly payments or a settlement where you pay less than what you owe. Some creditors have hardship programs available for business owners facing tough financial situations.


Embrace good debt

Small business owners can use low-cost debt to their advantage. You might fear debt but its value is determined by how you use it. If you’re able to qualify for a low-interest loan, like SBA loans offered by SmartBiz, you can use proceeds to work on reducing high-cost debt. Would a new piece of equipment or another asset help generate revenue? Can you consolidate high cost debt? These are just a few ways low-cost debt can help you get out of debt that is hurting your business. For more information, read this post on the SmartBiz Small Business Blog: The Benefits of Long-Term Debt for Your Small Business

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