Refinancing and consolidating business debt is a common practice in the business world. It is used by businesses to help ease the pressure of existing debts and loan repayments. A lot of businesses and companies at some point during their life-span will experience cash-flow issues which could in turn then cause problems with debts that they had previously taken out. If this applies to you or to your business, or perhaps you would just like to learn more about refinancing and consolidating business debt then read on, this guide is for you.
Why You Should Consider Debt Consolidation
Business debt consolidation is the process whereby a business or company consolidates, or combines, a number of different business debts/loans from multiple lenders/banks/institutions into one single larger debt/loan from just one provider. This has a wide range of benefits and is actually a much simpler process than it would seem. Apply now here.
Why You Should Consider Debt Consolidation
The main and most important benefits of this are as follows:
- Instead of multiple loans or debts spread across a range of different providers, you will have just one single debt with one single provider. This makes repayments much, much simpler and streamlines the entire process.
- Replacing several repayments/direct debits with just one can help to alleviate the stress and worry that you may have had regarding your debts. Furthermore, you will only have one contact at your chosen lender rather than several. When you combine all of the above the end result is that you will have far greater freedom and therefore more time to be able to focus on your business and its day-to-day running.
- With debt consolidation, the idea is to attempt to source favourable terms, inclusive of a lower rate of interest, so that your monthly repayments are reduced and therefore more manageable. This will give you some extra breathing space and will give you the chance to pay off or address financially your other obligations, accumulate funds or invest in other essential areas of your business.
- Ultimately, with successful debt consolidation, you will be able to improve the cash flow of your business which is, of course, vital to maintaining profitable operations.
- By improving your cash flow, you will free up yourself more working capital, which would have previously been wasted on paying high-interest rates and/or debilitating monthly loan repayments.
- With restricted cash flow, or if you are spending all or most of your income/profit on costly monthly debt repayments then you are restricting your businesses ability to grow. When you free up your finances you free up potential investment for your business. This means that you can invest your money, improve profitability, and keep yourself in the black.
- If you are only just in the black each month then consolidating your business debts can help keep yourself and your business safe and free from default risk. The potential consequences of defaulting on certain types of loans and debts are considerable and costly. You can receive a County Court Judgement or even face insolvency.
- The specific types of debts that you are able to consolidate into one are vast and varied and include corporate credit cards, creditors, business loans, debt from suppliers and debts from collection agencies, to name but a few.
Important Things To Consider
In our opinion, if you need help managing your debts and the monthly repayments then the positives of a debt consolidation vastly outweigh the negatives. One of the important things that you should consider If you do decide to consolidate your debts is that the length of time that you will be repaying your loan for will increase.
What Is Refinancing?
Refinancing refers to the process of taking out a brand-new loan to pay off an old loan or collection of different loans. By doing this, you can source for yourself a loan that has:
- A much lower rate of interest
- A longer repayment duration
- A larger principle
- A combination of all 3
It is worth noting that unlike a consolidation exercise you do not need to have multiple debts from multiple sources to benefit from refinancing.
Why You Should Consider Refinancing
Debt consolidation and debt refinancing do share a lot of the same benefits though they differ in scope and in action. The following are some of the most important and beneficial reasons why you should reconsider refinancing your business debt:
- By refinancing you are reducing your monthly repayments which affords you greater cash flow. This enhanced cash flow can be used to invest in your business which in turn can facilitate further business growth. This growth then can improve your overall cash flow and profitability.
- In taking out a loan, you can, should you need, take out a larger sum of money so that you have cash left over after your debts have all been paid off. If you do decide to do this, then it is important to make sure you still keep your monthly repayments the same, or less, than what they were before you refinanced.
Both refinancing and debt consolidation is widely used by businesses all over the world. Essentially, they are tactics that help to ensure the long-term health of your business rather than hunting down the short-term wins. Before you look to refinance or to consolidate your debts you should get all of your business’s finances in order, so that you have a complete picture as this will help in securing yourself the very best deal with the best terms for you and for your business.
To apply for refinancing or consolidation with us then please get in touch with us and a member of our team will be able to help you.