Small business loans for debt consolidation allow a company to eliminate high interest fees by providing the financing necessary to combine multiple commercial debt accounts into one payment with unified terms.

Consolidation loans for small business can be an invaluable resource for a company struggling with economic hardships, but restructuring debt will not provide a solution for poor financial planning and management. Small business debt loans may get a company out of debt temporarily, but only an organized accounting system and a sound budget will keep it out of debt in the future.

1. Study all the terms of the loan, such as the interest rate and the number of years it will take to pay off to get a more accurate assessment of the total cost.

2. Remember to factor any upfront fees, such as a down payment, into the price of the loan as well as any collateral necessary to obtain financing.

3. Read the fine print to find out about other potential expenses associated with the consolidation loan, such as a balloon payment penalty for early payoff and default interest rates for a late payment.

Action Steps for Sourcing Small Business Loans Online
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Understand the terms of small business debt consolidation loans before accepting the monthly payment

Calculate the interest rate and life of the loan with the amount financed to determine a reasonable monthly payment. Refinancing with a competitive interest rate will immediately begin to save the business money by lowering the total monthly payment. However, small business debt loans may ultimately cost the company more money in interest fees over the life of the loan by extending the repayment term.

I recommend: The SBA loan guaranty program helps small businesses compete for limited financing, and it places caps on the amount of interest a participating lender can charge. For a loan of $50,000 or more, the lender can only charge 2.25 percent over the Prime Rate when the term is less than 7 years and 2.75 percent above Prime if the loan matures in more than 7 years. The cap increases by one percent for loans between $25,000-$50,000 and loans under $25,000 respectively. Financial Calculators has a business debt consolidation calculator that will help you determine if debt consolidation can save your business money.

Know all the initial out-of-pocket expenses for the small business debt restructuring loan

You need to anticipate the total cost for a commercial debt consolidation loan. Be aware of all the upfront costs to secure the loan, such as origination fees, which typically equal about 1 percent of the total loan and the total closing costs which average about 3-4 percent of the financing.

I recommend: Bank of America Premium CreditLine has no closing costs which simplifies the loan process. It offers competitive rates, and you only pay interest on the portion of the credit line you spend. Wells Fargo small business advantage line of credit requires no down payment or collateral to qualify.

Review the agreement for the business credit debt consolidation loan diligently to spot hidden fees

Carefully examine all the loan documents to look for additional charges like balloon payments and late fees before signing any type of contract or agreement. Evaluate all the potential pricing and costs of small business loans. Debt consolidation is not always the best answer, so take the time to weigh all your options.

I recommend: Wachovia business equity line provides fast approval decisions and low interest rates combined with almost no fees to acquire the financing. Plus, the equity line may save you even more money at the end of the year with potential tax deductions. Merchant Resources is an alternative to a traditional installment loan or line of credit. Businesses that process at least $3500 in credit card transactions per month are eligible to take a cash advance against their future credit card sales.

Tips & Tactics for Successful Business Loan Application

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• •  Small business debt counseling is another option for paying debts without taking out a loan.

Small business loans for debt consolidation are a workable solution for many business owners. When a business first starts, there are many costs involved and business owners find themselves buried under a number of loans. Small business debt consolidation loans help make sense of the madness.

If you find that you are paying too much in interest or are frequently forgetting your payments because you have too many to keep track of, then it's time to consider small business debt restructuring.

Small business consolidation loans can help you by:

1. Lowering your interest rates. As a new business owner, you may have had to take loans with high interest rates due to lack of credit. Now that your business is growing, a commercial debt consolidation loan can get you a lower rate.

2. Locking in a fixed rate. If you have an adjustable rate loan, you are at the mercy of rate fluctuations. You can often save money by getting a fixed rate with a small business debt consolidation loan.

3. Making the repayment process easier. Instead of keeping track of several monthly payments, debt consolidation for small businesses reduces this to just one monthly payment.

Action Steps
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Start with small business debt counseling to review your options

If you have a lot of debt, you may not know what you can do to stop the problem. Qualified debt counselors can review your situation and discuss the many different ways that you can reduce your debt. This is great for business owners that want to get out of debt quickly, but don't know how to do so.

I recommend: Fill out a form through Debt Consolidation Care and a representative will contact you with free advice regarding your debt. Money Management International is a non-profit organization that also helps teach you about your debt management. This information applies to business owners and consumers alike.

Get loans from companies that offer consolidation loans for small business

Not all types of loans are for debt consolidation. Make sure that you work with a company that offers loans that are specifically for debt consolidation.

I recommend: Wells Fargo offers loans that the Small Business Administration (SBA) backs that you can use for debt consolidation. Charter One also offers plans for debt consolidation.

Refinance your commercial mortgage to get a commercial debt consolidation loan

If you have a considerable amount of equity in your property, you may be able to refinance your mortgage so that you can get extra money. Use this money to pay off your debts and you'll only have to worry about the monthly mortgage payment.

I recommend: You can refinance your mortgage through Key Bank or Bank of America. You may also want to talk to your current mortgage provider to see if they can offer you a great deal.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Small business debt consolidation loans are not always a good idea. Some consolidation loans come with hefty fees, which means you may not save all that money. Make sure you do the math before signing a contract.

Small business debt consolidation loans allow a company to combine more than one credit account into a single monthly payment. Essentially, the business borrows enough capital from one lender to pay off multiple debts owed to other various financial institutions. Small business debt restructuring saves the organization money by refinancing the previously high interest bearing accounts into an individual loan payment with a lower interest rate, which significantly reduces the total monthly finance charges for the debt.

When considering small business loans: debt consolidation for beginners or need to know how to locate reputable small business debt consolidation lenders, consider the following:

1. Crunch the numbers to see if business credit debt consolidation is even a feasible solution for your company.

2. Familiarize yourself with the various kinds of small business debt relief funds on the market to get a better idea about your available options.

3. Be aware of any initial costs you are going to have to pay in order to get financing for small business debt elimination.

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Find out if a commercial debt consolidation loan would financially benefit your business

Utilize online tools and calculators to determine if the consolidation loans for small business that are currently available would save your organization more money.

I recommend: Bankrate offers several handy calculators to help you assess vital ratios to better determine the financial health of your small business. Expo Group has a debt consolidation calculator, which will provide you with a reasonably accurate idea of what the monthly payment will be on your debt consolidation loan.

Understand how the different types of small business consolidation loans function

It is in your best interest to be as informed as possible about small business loans for debt consolidation before you begin negotiating with lenders. It is not necessary for you to become an expert on the subject. All you need is a basic understanding of the pros and cons associated with each one of the financing options you are considering.

I recommend: The U.S. Small Business Administration provides information about the kinds of loan programs and financial assistance available for small businesses. You will even find facts about eligibility requirements for each loan, interest rates and maximum loan amounts. SmallBusinessLoans.com has an invaluable graph with the definitions to explain all the key business financial terms you need to know more about, such as second round financing, small business line of credit, CAPlines and SBIC.

Know all the terms and conditions of small business debt loans upfront before you sign anything

You need to be informed about any out-of-pocket expenses required to secure the financing, such as loan origination fees and closing costs, as well as all the details of your loan commitment like the annual percentage rate (APR) and the number of years for your repayment term. You should also check the fine print for clauses explaining any penalties or extra fees you may incur.

I recommend: iBank will connect you with small business debt consolidation loan providers in your area, as well as give you more information about the different loans available and the commitment terms. PNC has information about the business use for several different financing options and provides in depth information to help you better understand the basic terms of each type of financing.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Small business debt counseling is another option for consolidating your credit without trying to qualify for a loan. However, you need to be very cautious about dealing with a credit counseling agency and only go with a non-profit agency.

If your small business is in so much debt that you are falling behind on your payments and fear you may need to file for bankruptcy, it is time to explore debt consolidation loans. A business debt consolidation loan can save your business, so you can continue operating and making a profit as you pay off your debts. However, before you explore small business debt consolidation loans, it's wise to learn some of the terminology associated with them, and with the process of business debt consolidation.

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Business debt consolidation loan

A business debt consolidation loan is one loan that a business takes out to cover all outstanding business debts. In addition to satisfying creditors, this type of small business loan allows a business owner the convenience of a single monthly payment. It can also lower the interest rates a business pays on its debt.

I recommend: Read an overview of business debt consolidation loans at WiseGeek.

Business debt counseling, or commercial debt counseling

Before you consider a business debt consolidation loan, you should undergo business debt counseling, sometimes known as commercial debt counseling. During a business debt counseling session, a counselor will examine your business's finances and contact your creditors to negotiate debt reduction and consolidation.

I recommend: ConsolidateCommericialDebt.com offers business debt counseling, and explains the basics of its services.

Business debt restructuring

Business debt restructuring is the process of reorganizing existing debt, which sometimes involves consolidation, to help the small business avoid bankruptcy.

I recommend: Read about how business debt restructuring works at American Finasco.

Small Business Administration, or SBA, loan

An SBA loan is designed for small business owners and guaranteed by the Small Business Administration. It can be used for debt consolidation, among other purposes, but you need to meet strict eligibility requirements.

I recommend: Read an article on the use of SBA loans for debt consolidation at MortgageLoan.com.

Unsecured vs. secured loans

Business loans, including debt consolidation loans, come in two basic types: unsecured and secured loans. An unsecured business loan is not backed by tangible collateral, such as equipment; whereas a secured loan is backed by a business's tangible assets. Because an unsecured loan is riskier for the lending institution, this type of loan is generally only available for small debts.

I recommend: Read more about unsecured business loans at Business Finance. At iBank, find out more about secured business loans.

Debt management

After you obtain a business debt consolidation loan, or choose another debt consolidation option, your company will need to engage in debt management. Debt management is the process of ensuring that existing debt is paid and minimal new debt is incurred.

I recommend: AmerAssist specializes in debt management for businesses.