How to Consolidation Business Debt in 6 Steps 

Now that we’ve reviewed the best options for business debt consolidation loans, you may be wondering: How do I actually go about consolidating my business debt?

Here are six simple steps you can follow to optimize your business debt consolidation:

Step 1: Identify Current Business Debts

Look at your existing business loans and the details of each, including the outstanding amount, the lender, the interest rate, the maturity date, and the payment schedule.

Step 2: Check for Prepayment Penalties

Using a debt consolidation loan to pay off smaller loans before their maturity date could trigger prepayment penalties. Prepayment penalties can be expensive, so find out whether you’ll incur this fee on any loans before you pay them off to consolidate business debt.

Step 3: Determine Total Business Debt and Calculate Average APR

Add up all the loans you plan to consolidate, plus any prepayment penalties, to understand how much you’ll need to borrow for your business debt consolidation loan.

You also want to know the average annual percentage rate(APR) of your existing loans, so you know what kind of interest rate you’re looking for with your debt consolidation loan. It’s important to remember that APR is not the same as an interest rate. APR is the annualized interest of a loan, including all fees, and gives you an honest assessment of the cost of the loan.

Step 4: Search for a Business Debt Consolidation Loan

At this point, you’re ready to look for the right business debt consolidation loan for you. You can start with the top options on our productsand consider which loan product and lender will work best for your business.

Compare the APR of your old loans with that of the potential new loan. Ideally, your new loan will have a lower APR than the loans you are consolidating.

Step 5: Decide Whether to Consolidate

Ultimately, you need to determine if the new loan makes sense for your business, given your specific finances and priorities. While you may receive a lower APR on your new debt consolidation loan, there are other factors to consider as well.

For example, the new loan might also have a much longer term, which means you’ll end up paying more in interest over time. Additionally, consolidating your business debt into one loan also means you’ll be paying interest on interest—you’ll be paying compounded interest with your new loan on top of the initial interest you owed. On the other hand, a debt consolidation loan can conserve cash flow and make repayment simpler.

Step 6: Pay Off Existing Debts

This step is typically pretty hands off. After you apply for and are approved for a business debt consolidation loan, your new lender will divide up the money among your existing creditors. Future payments will be made to your new lender.





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