Loan Articles

In the same way consumers can find themselves in debt, businesses can incur plenty of financial obligations to other entities. Substantial business debt may be due to expansion of investments, unexpected expenses, and poor management strategies. When the revenue generated by the company does no longer covers the company’s operations, debt relief strategies should be sought for. Otherwise, debt collection proceedings and even lawsuits might follow.

One way to manage debt is to apply for a business debt consolidation loan. You will obtain a single loan to repay all other financial obligations rather than deal with several creditors. In this way, you won’t need to remember when multiple payments are due, risking penalty fees on missing one or more of them.

The debt consolidation option is available for both individuals and companies. However, keep in mind that it is more difficult to obtain a business consolidation loan. Business debt usually involves larger amounts, and creditors regard it as high risk debt.

The main goal of businesses is to generate revenue, and lenders would look at the financial state of the company before offering a consolidation loan. Signs of poor management will suggest that it is unwise for the lender to get financially involved with the

Canada’s Office of Consumer Affairs recommends that business owners compile a list of all current debts before meeting with the loan officer of the financial institution. In this way, they will have a precise idea of the amount of outstanding debt they are left with.

Although not all debts should be necesserily consolidated, it is a good idea to inform the loan officer about them. The official needs to look at the full credit file of the business entity before rendering decision on the consolidation.

There are two types of loans available for businesses: secured and unsecured. Secured loans require the pledging of a valuable business property that serves as collateral against the financial obligation. Upon failure to pay off the loan, your property will be seized to cover the missed payments. Unsecured loans, on the other hand, do not require collateral and are usually extended for small amounts of debt. They come with much higher interest rates.

If you think that the offered interest is excessive, do not hesitate to look for other financial institutions that offer a better rate. Some credit counselors recommend that you limit your search to three institutions. A large number of inquiries on the credit report can have adverse effect on the credit score of the business.

It should be noted that many finance companies offer business debt consolidation, charging higher rates compared to mainstream institutions. For this reason, you need to carefully review their terms and conditions, including special terms, fees, loan term, and other relevant information.

Once your application for business loan consolidation is approved, it is not unusual for the financial institution to pay off all outstanding financial obligations to the creditors. Depending on the arrangement, the new creditor may pay directly to the other financing entities.