Starting a business involves many expenses, such as buying equipment and inventory, staffing, leases, etc. All of these expenses add up quickly and eat into profits. To help with expenses and start their company, many small business owners may rely on multiple funding sources, including taking out different business loans or lines of credit. 

While loans are one of the best solutions to turning dreams into reality, they can quickly overwhelm even the most experienced business owner, with varying due dates and building interest. 

To solve the headache of having multiple loans, consider debt consolidation as a solution for your small business money woes. Debt consolidation allows you to combine your debts, making them more manageable and lowering interest rates. While debt consolidation is helpful for some business owners, it’s not for everyone. To reduce money headaches, you should consider all solutions, including debt consolidation. 

What is Business Debt Consolidation?

Like consolidating personal debt, such as student loans, business debt consolidation is taking some or all of the loans taken out for your small business and merging them into one larger loan. A larger loan may sound like a bad idea, but it can lead to a lower monthly payment in most cases. 

By consolidating your business’s debt into one loan, you can streamline the payment process and reduce the overall interest of the loans. Debt consolidation is great for small businesses that may have high-interest forms of financing like lines of credit, merchant cash advances, or credit cards. The newer, consolidated loan may have a lower interest rate. 
 
You can only consolidate your debt if you have one or more loans or forms of debt. Otherwise, small businesses with a single loan should look into debt refinancing, which focuses on lowering the payment of an individual loan.  

How Does Business Debt Consolidation Work? 

Debt refinancing for small businesses is simple: the business owner takes out a single loan that covers the other smaller outstanding loans. Then uses the funds to pay the remaining principal and interest of the small loans, leaving just the larger loan. 

By getting a new loan, you can often extend the repayment period, allowing you more time to pay off your debts and more time for your business to grow without the pressure of multiple loans hanging over you.
 
As with many small business loans, you apply for a new business loan for debt consolidation through any financial institution, such as SouthEast Bank. If approved, you can use the new loan to pay off the others. 

Make sure to look up any if there are penalties to paying off your original loans early. Each bank has its own requirements and terms, so be sure to work closely with your chosen bank to understand what you are applying for.