The Top 3 Reasons to Consolidate your Business Loans
Debt consolidation is the process of grouping multiple debts into a single loan. The goal is to reduce the quantity and sum of monthly payments by combing a number of loans with different interest rates, terms, balances and repayments into one easy to manage monthly payment. In some cases, there is also the potential to access lower interest rates, resulting in lower repayments over time.
1. Reduce interest rates and monthly repayments. By consolidating smaller debts into one large facility, you may qualify for lower interest rates and/or a longer loan term. Consequently, your monthly payments will decrease and you will have more cash available for other pursuits.
2. Improve cash flow and simplify cash flow management. Having debt spread across several lenders or loan products can lead to difficulties in account reconciliation. With different due dates for each loan, you and your team can easily waste hours preparing payments and analysing cash flow. By having all loans consolidated into one single payment, your repayment schedule is predictable and more cash is available as a result of the lower monthly payment.
3. Make room for additional borrowing. When small businesses are approved for consolidation financing, they may qualify for additional borrowing as a result of the lower debt to service coverage ratio (ie. the ratio between your repayment commitments and monthly net revenue). This frees up working capital that can be used to grow the business or for essential purchases such as equipment.
When should you consolidate your business loans?
The best time to consolidate your business loans really depends on your unique circumstances. Generally, if you and your business have a good credit history you can apply for a debt consolidation loan at any time. However, if you have taken out a series of short term loans to cover business expenses and gaps in cash flow, you will need to show about six months of positive revenue trends to increase your chances of approval. No matter your current situation, the business loan specialists at Lendfin can help develop a financial strategy to ensure you take on the best financial products for your situation.
How to consolidate your business loans
At Lendfin, we have a proven record of helping Australian businesses to reduce their overall debt and improve cash flow through debt consolidation. We work with the major banks and independent lenders to access the most suitable debt structure to help our clients achieve their business and personal financial goals.
The steps to apply for a debt consolidation are simple. We recommend contacting an adviser at Lendfin before starting your debt consolidation research, as we can help explain your options and provide up to date market advice.
After you contact us, we will book a meeting or call to understand your current financial position. At this stage, we will look at your existing credit facilities and assess whether a restructure or consolidation is appropriate for your circumstances. We will then scour the market for a selection of loan products to suit your needs, including lines of credit, business loans, asset finance and business credit cards.
Once a product and lender has been selected, we will assist you to prepare the application paperwork. With over 18 years of experience, we have the knowledge to help you maximise your chance to have your business debt consolidation loan approved.