Business debt consolidation loans: What you should know
What is a business debt consolidation loan?
A business debt consolidation loan enables a business to gather together its current finance agreements and streamline those into one single finance solution. Instead of taking on an additional financial commitment, a business can apply for a loan that equals the amount of debt they currently owe, and with the loan, the business can pay off the existing debt, simplifying repayments.
By consolidating existing debt, a business can potentially reduce their monthly outgoings, free up cash flow for day-to-day expenses, and ensure that payments can be understood easier, making for improved budgeting.
What type of solutions are available with business debt consolidation loans?
This loan type is granted to businesses based off their creditworthiness, instead of being tied to a business-owned property or other asset. Lenders typically determine eligibility based on credit history and affordability, and typically due to the higher risk of unsecured lending, a personal guarantee is required.
This type of funding is suitable for business who are considered asset light, or who do not want to use their owned assets as security.
With unsecured loans, businesses can pay off their outstanding payments with no early repayment fees, making it suitable for companies looking to fund stock or who require flexible finance.
A secured business loan is a product that uses assets, such as a property, against the value of the loan. A property evaluation is necessary to determine whether the property is fit to be used as security. The property will then be valued to determine how much capital the business can borrow, with typically up-to 75% of the properties value able to be secured.
With a secured loan being backed by collateral, it is usually deemed as lower risk in comparison to unsecured lending. As a result, greater loan amounts and higher approval rates may be possible.
An asset refinance agreement allows a business to leverage the value of their owned assets, receiving a large percentage of the assets valuation as capital to be used for their business needs.
The funds can then be used to purchase new assets, cover day-to-day expenses, and consolidate existing finance agreements. Through streamlining existing finance, a business can potentially reduce their monthly payments and simplify their repayment structure.
At the end of the finance agreement, and all payments have been made, you will resume ownership of the asset, and throughout the payment term, still able to use the equipment for operations.
How do I secure a business debt consolidation loan?
When applying for a business debt consolidation loan, strengthening your finance position is crucial to improve your chances of approval. Demonstrating steady revenue growth helps confirm your ability to manage repayments. Develop a clear plan that details how the loan will be used.
Additionally, providing evidence of consistent positive cash flow will enhance your application. Lenders look for assurance that your business can handle the finance without issues.
What are the benefits of business debt consolidation loans?
- Streamlined repayment structure
- Boost to cash flow
- Potential for reduced monthly payments
- Solutions bespoke to each business
- Flexible finance options
- Simplified budgeting
Applying for a business debt consolidation loan
MAF Finance Group can compare offerings from a wide range of banks and alternative funders to determine the most suitable option for each individual business.
To learn more about our finance solutions, fill out the form below. If you would like to speak to us directly, call us on 0115 958 6872, and a member of our team will be happy to speak to you. Alternatively, email us at [email protected].
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