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Consolidating Business Credit Card Debt
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With the creation of the internet and the world being more connected and globalized than ever before, more and more people are venturing out on their own to start a business. The opportunities are endless and there are so many things you can do, the world is your oyster. However, there are a few reasons why not everyone is able or willing to start their own business. Not only does it take a lot of hard work and a ton of dedication, it also can cost a lot of money.
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Of course, when you start a business, there is almost no way to avoid the fact that you will likely have to borrow some money from a lender. Sure, some people have wealthy family members or friends (or have enough money sitting around to start the business), but these people are generally few and far between.
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As a result, if you want to start a business, you will likely need to be comfortable borrowing money from a lender at some point. However, you shouldn’t just go out and secure a ton of debt without thinking about the consequences and potential outcomes. With how easy and quick it can be nowadays to secure a loan, you need to make sure only to take out a loan you can afford to pay back. Also, you need to ensure that the recurring payments are within your budget so you avoid getting stuck in a vicious debt cycle. With that in mind, here are a few tips and steps for dealing with business debt.
To learn more about the endless debt cycle and how to avoid it, read this.
How to Deal With Small Business Debt?
With so much going on in a business, it can be incredibly tough to get organized and before you do anything else, you need to make sure you’re always aware of the various debts you have and your plans to repay them.
Speaking of plans, you should have plans in place to pay back all of your various debts and if you don’t, it’s time you make some. Figure out which debts to pay off first (generally the ones with the highest interest rates) and which ones can wait. In addition to that, think about whether you can handle it alone if you need help or anything like that.
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Next up is simple, carry out your plan as you have outlined. Of course, it is impossible to predict every single emergency or roadblock that may come up, but having a plan is infinitely better than not having one at all. The plan also needs to consider what you’ll do if the business tanks or you experience a revenue problem. Leave no stone unturned.
Now that you have some general tips on how to deal with all different kinds of debts as a small business, let’s take a look at how and when it makes sense to consolidate the debt you have accrued. But before we can get into it, we need to make sure you understand what consolidating your loans actually means.
What is “Consolidating debt”?
In simple terms, debt consolidation is when a person or business takes out a new loan to pay off a number of small loans. The reason they do this is it brings all of these debts together into one loan. This makes it easier to manage and means only keeping track of and making one payment a month, instead of multiple. So, what you are doing is basically getting a much larger loan to pay off all of your smaller debts, and then tackling that one huge loan on its own. This will make your life quite a bit simpler, which is always a good thing when running a business.
While individuals do consolidate debts from time to time, it is often more common for businesses to do so, as they frequently have a lot of smaller loans to deal with that come from purchasing buildings, equipment, and more. So now that you know what debt consolidation is, let’s see how you can go about getting small business debt relief if you need it.
To learn how consolidation can help your financial situation, look here.
How and When to Consolidate Your Business Debt?
As mentioned earlier in the article, most businesses will need to secure a loan or open a credit card or two at some point to pay for the various expenses that add up when you are running a business. Some entrepreneurs are able to keep up with their payments and ensure their debt is paid off on time without any hiccups.
However, that doesn’t go for everyone. Sometimes a slow period in your sales or disruption in your cash flow can leave you unable to pay all of your debts. If you slow down or stop the payments you run the risk of not only being charged an arm and a leg in interest, but you could also lose your business as a result of bankruptcy.
As a result, it could be a good idea to consolidate your loans in order to simplify things and if you get a lower interest rate, there is a good chance you will save money overall as well. Debt consolidation is most often done through a bank or other financial institution, but there are also debt repayment programs and various online financial companies that can help you out. Just like you can get a loan from many different sources, the same goes for debt consolidation.
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Why Should You Consolidate Your Business Debt?
The reasons why people decide to consolidate loans are plentiful and could be anything from wanting more simplicity in their lives, to getting a better interest rate to just making it much quicker to make and keep track of payments.
There is no set time when you need to consolidate your debt. Some people will consolidate only a couple of debts, while others juggle a dozen debts every month or so. It is key to do your own research on your financial and business situation and see what time makes sense for you to consolidate. As for how to consolidate your business debt there are a number of different ways, which we will now look at in detail.
For an article about bad credit debt consolidation, check this out.
What Are The Different Types of Business Debt Consolidation?
Before you go and consolidate all of your business debt, you should be aware of the different types of debt consolidation that can work for you. You can do a credit card balance transfer, simply take out an unsecured loan to consolidate your debts, take out a home equity loan if you own a home or can even request the help of a debt management program.
Each of these has their own pros and cons and your choice will depend on your unique situation. For example, if you can qualify for a new, low interest credit card (with low balance transfer fees), the balance transfer option might be the best for you. On the other hand, if you own a home, you can get a secure debt consolidation in the form of a home equity loan, but this puts your home at risk so be careful. As for the unsecured debt consolidation loans and debt management program, there are dozens of options in those categories for everyone, no matter how much you make, how big your debts are or your credit history.
We hope that this article has shed some light on the topic of business debt consolidate. Whether you need help finding unsecured loans for business consolidation or just want help understanding the process of consolidation, we hope we helped you out. Before making any rash decisions, be sure to do your research and take an unbiased look at your business’s financial situation, to make sure it is indeed the correct one.
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Margaret Johnson is in the business of helping Canadians tackle their debt, deal with credit issues, and regain control of their finances.