Best business debt consolidation loans of 2022

What is business debt consolidation?

Business debt consolidation differs from debt refinancing. When you refinance a loan, you replace one loan with a different loan, usually with a lower interest rate or more favorable terms. With debt consolidation, you replace several different loans with a single loan.

How to consolidate the debts of a company?

To consolidate your business debt, you’ll start by determining the total amount you owe on all the loans you want to consolidate.

Then you’ll take out a new loan — it’s your debt consolidation loan — that’s at least as big as what you owe. You can use many business term loans to consolidate business debt, including bank loans, online loans, and some SBA loans.

Then you will use your debt consolidation loan to pay off your existing loans.

After that, you will only have to make payments on your debt consolidation loan instead of multiple debts.

Are Debt Consolidation Loans Worth It?

Business debt consolidation loans may be worth it if:

  • One or more of your existing loans has a high interest rate and you may qualify for a lower rate.

  • One or more of your existing loans has terms that you don’t like, such as frequent repayments or a short repayment term, and you may qualify for better terms.

  • You find it difficult to control your various debts and you would have an easier time with a single loan.

Compare your company’s debt consolidation options

When shopping, note that you have many business loan options to consolidate your debts. Certain types of loans, such as SBA microloans, cannot be used to pay off existing debt. But many other business term loans can. Don’t limit your search to loans marked explicitly for debt consolidation.

If you can’t qualify for a bank loan, SBA loans are a great alternative, offering low interest rates and long repayment terms. These loans can be a little easier to get, though SBA lenders — usually banks and credit unions — still require good credit (a score between 690 and 719) and several years in business. However, like bank loans, SBA loans can also be slow to fund.
Online business loans can be a good option for new businesses or business owners with fair credit (a score between 630 and 689). They may come with higher interest rates and shorter repayment terms than banks, but they may be easier to obtain. They also tend to fund themselves much faster than bank and SBA loans, sometimes within days.

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