Using Business Consolidation Loans

A business consolidation loan helps a business manage debt management with a streamlined and easy to manage loan product.  Consolidation loans are used frequently by businesses with large amounts of debt. The business consolidate various payments into one, single payment.

Business Consolidation Loan Example

Debt consolidation is an important tool for businesses looking to reduce their costs.  A business that has 10-year loans of $1,000,000, $500,000 and $100,000 financed at 10, 8 and 7 percent respectively pays annual simple interest of $14,700.  Consolidating the loan into one at a lower rate of 7 percent results in a simple annual interest cost of $11,200, a savings of $3,500. The point of this illustration is to show the benefit derived from consolidating a business loan at a lower interest rate.

Qualifying for a Business Consolidation Loan

Qualifying for a business consolidation loan requires the business to be in good financial standing and demonstrate the ability to pay back the new loan under the terms and conditions stated in the loan agreement. The loans should also be current. The credit rating of the business will need to be verified, as well as the other underwriting standards.

Use of Business Consolidation Loans

The savings derived from a business consolidation loan can be used to finance other operational needs or investment opportunities for the business. The lower cost of the loan can help expand the business’s operating capacity, hire additional employees or invest in new equipment and technology.  The savings resulting from a business consolidation loan may also be used to invest in the future growth and expansion opportunities for the business when they arise.

When to Consider a Business Consolidation Loan

A business should look to use a business consolidation loan when interest rates are lower and their chances for qualifying are high. A business will want to consider the impact of a loan consolidated and whether the terms of the loan consolidation will result in a more favorable and less costly option.  Fees and other charges that were waived in any of the previous loans should also be waived in the consolidated one and the business should look to work with a lender that is able to provide them with the best business loan consolidation at the lowest possible rate.