If you are new to business and are wary of the consequences large and unmanageable debts can bring in to any business then know one thing for sure that there is no better way to stay out of debt apart from consolidating it. For most businesses and even individuals, debt consolidation seems to be the most effective and feasible way to reduce as well as stay out of debt.
As a startup it is almost certain that you will start out small. No matter how hard it is too digest, the job responsibility of a startup is much more and complicated in comparison to any established enterprise or corporations. There are several brilliant minds in these enterprises to take care of all different aspects of the business but out here you are the only one to take all decisions and manage all matters. Therefore, running a business independently needs a lot of effort, time, perseverance, guts and most importantly a lot of foresight.
Even if you have all the correct and necessary ingredients, in most of the times the recipe may not turn out to be as good as expected due to lack of planning and foresight. You will soon find that from somewhere or the other debts seep in and within a very short time becomes insurmountable. This will add to your workload resulting in an extra headache to prevent further draining out of funds.
Consequences of debt
As soon as debt creeps in it will show its adverse effects pretty fast.
- You will have multiple creditors around to pay off every month along with various rates of interests and with different premiums.
- Slowly but surely these debts will claim more time and importance than your actual business compelling you to shift your focus.
- Soon you will end up scrounging for every penny available to pay off your debt.You will tend to think whether this is the better way to manage these debts or is there anything else that can be done?
- You may even try to bargaining and negotiating with your creditors to get more time to pay the debts off and even make requests to reduce the outstanding amount and rate of interest which most of the times fall into deaf ears. This will also have a very bad effect on your credit records as well.
- You may even contemplate seriously in shutting down your business finding no other alternative to deal with even after looking up in nationaldebtreliefprograms.com for free grants if any.
Well, there is no need to worry so much as you can have your debt consolidated very easily and effectively. This will allow you to combine all your debts into a single one and pay them off. Now you will have one single loan usually at a low rate of interest to focus on every month.
Follow strategic steps throughout
Debt consolidation loan happens to be the smartest moves of all as it will take off your worries and give you more time to focus on other significant areas of your business. Most startups stayout of debts with debt consolidation. However, to avail this benefit you will need to prepare yourself before, during and after so that you can manage your debt and stay out of it. These tips will help you a lot in the process.
- You have to be more organized and plan your moves before you take on a debt consolidation loan. Start by prioritizing your debts, bills and payments. Cut down your expenses on utility introducing an “Earth hour” in your office. Do not fall behind your payrolls and taxes.
- Consolidate your loans before they start going out of control and never procrastinate your decision.Apart from that, take care of the administrative, accounting and management aspects of your business. You may even outsource your debt worries to a reputable and reliable company to be out of the mess.
- Most importantly, make sure that you have and fulfill all the criteria that are required to a loan from a consolidation company.
The criteria may vary from one lender to another but most commonly they will need a business to be at least six months old and have a solid credit score of about 500 or more. Apart from that, your business must also have a real and significant annual turnaround. Banks and credit unions will have a much more stringent requirement and will need higher credit score of over 650 of a business that is at least a year old.
Advantages of it
There are several advantages of business debt consolidation loan. Each loan will come with its own set of benefits for different business.
- You will make lower payments every month as you will collate all smaller loans into a large one.
- You will usually have an extended repayment periodto get enough breathing time to stand around.
- You will also get a few extra cash as most loan consolidation companies will ensure that your business move forwards after paying off your debt and they get back their money.
However, there are a few things you should do on your post-consolidation days if you want to stay out of debt. Keep your credit card transactions to a minimum so that you do not end up in a situation you just came out of so badly.
Make sure that you repay the debt consolidation loan on time and duly so that you can build your credit scores that is damaged. This will help you to get further loans in the future easily.
Make sure that you follow a more stringent collection policy for your business and maintain a proper balance between your bills payable and receivables.
Work with the right company
Lastly and most importantly, you must work with the right and most reliable debt consolidation agency that has experience of working with startups because there are specialized needs of a startup. Make sure that you choose a company after checking their testimonials and reading their genuine reviews.