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Should You Consolidate Your Business Debt?

Bad Debt Tax Deduction

As a business owner you already know there are lots of reasons to have debt. Equipment, licenses, rent or leases, advertising, and many other expenses can add up.

Regardless of what makes up the debt it can be difficult to juggle multiple payment on a frequent basis. After all, just running a business can be stressful enough.

But maybe there are steps to take to alleviate some of the pressure. One thing that may help is if you consolidate your business debt.

Smaller Payment

One reason to consolidate your business debt is that you could end up with a smaller payment as a result. Rather than dealing with multiple payments you can’t afford throughout the month they are all in one payment.

Debt consolidation that provides for a smaller payment could help you keep your business afloat. Without it you may risk defaulting on one or more of your other loans.

Of course there are drawbacks to having a lower payment. For instance, consolidating may draw out the length of time you pay on your business debt.  This results in a debt burden that hangs over your head and stresses you out even longer.

In addition, you may pay more in interest over a longer period of time. Therefore, you would be wise to run some calculations and think it over before moving to consolidate your business debt.

One Creditor

You may like the idea of only having one creditor if you consolidate your business debt. This may be more favorable than having several creditors breathing down your neck.

With only one creditor to worry about, communicating with them is much easier. And let’s face the facts: You need to have your creditor in your corner while you work through your business debt issues.

Having a single creditor also means there is less chance of missing a payment. Additionally, if you have a question or concern that comes up, you only have to make one call to make.

Again, there are drawbacks. If you’re using a debt consolidation company, you may be paying them in addition to your debts. Always ask for a breakdown of exactly how much and where your money is going. That way you aren’t paying a huge sum for their services.

Lower Interest

It’s possible you may be able to get a lower interest rate as you consolidate your business debt.  That could potentially save your business money.

However, if you pay on the debt for a longer period of time there’s a risk you’ll pay more in the long run. Conversely, should you be able to pay off the debt faster than anticipated, you could come out ahead.

Other Options

Obviously business debt consolidation is not a cure for what ails your business. But it can buy you time to make other business decisions.

At the very least, you should take the following steps:

Cut Spending

To help the finances of your business you need to cut all unnecessary spending. Closely scrutinize how every penny of your business income is being used. Look for things you can eliminate or cut back on.

Eliminate Buying on Credit

If possible, do away with buying anything on credit so you can reduce business debt. You can’t continue your current business spending habits or your next course of action will be shutting down.

Increase Income

Look for ways to increase your business income. Perhaps that’s taking on a new product or service. Or, use free advertising avenues. Hold a sale and send out invitations through Facebook.

Whatever you decide to do, do it fast to increase the money flowing into your business.

Running a business is difficult enough. Staying in business when you have business debt is even tougher. Use this information to help you decide if consolidating your business debt is the right step for you.

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Financial Author
Kayla is passionate about helping people get their finances in order so they can pursue a life of freedom. She quit her job to work for herself with over $148,000 of debt and swears it was the best decision she’s ever made!

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