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When to Consider Debt Consolidation Loans for your Small Business?

Many business owners look for debt consolidation loans, as they can significantly lower the size of a firm’s monthly payments. What is more, such a loan could make it possible to borrow additional working capital. Nevertheless, it’s up to you to determine when it’s the right timing to consolidate your small business’ debt. This should depend on your firm’s financial situation, outstanding debt, and personal credit.


The Right Timing for Debt Consolidation Loans

If you pick a debt consolidation loan at the right timing, you might benefit from a more favourable repayment schedule, lower interest rates, and better terms. On the other side, consolidating your firm’s debt at the wrong moment might harm your credit rating; it could also waste your time and money, further impairing your possibility of taking on financing in the foreseeable future.

That being said, here are the top signs that outline you should consider debt consolidation loans.


  1. Your Credit Score Has Enhanced

Firstly, if your personal credit score is better than it was the last time you applied for financing, perhaps debt consolidation could make sense. An enhanced credit score will allow you to obtain longer repayment terms and more convenient interest rates – which is the whole point of debt consolidation loans.

Nevertheless, bear in mind that if your credit score has improved by a few points only, this doesn’t mean your situation is a lot different than it was beforehand. In fact, the change should be significant in order to get really favourable terms. What is more, regardless of how much your credit score has enhanced, negative credit listing such as repossessions or bankruptcies might hinder your eligibility for debt consolidation loans.


  1. Your Firm’s Credit Profile Is Better

It goes without saying that being a responsible borrower is an important consideration for providers of debt consolidation loans. That is to say, if your business’ credit profile has monitored a noteworthy improvement, this will display you as a responsible borrower. In other words, this should mean that you can handle your outstanding debt and that you’re not utilising the full value of your existing credit lines.

As a rule of thumb, a good business credit profile should have positive and timely payment histories, no reporting errors, no listings of bankruptcies and repossessions, as well as a high percentage of the available credit line you’re not utilising.

At the same time, it’s critical to understand the way in which business credit reports work – to determine how you can focus on building your business’ credit. A first step would be to check your credit and to aim at managing your outstanding debt.


  1. Your Firm’s Finances Have Improved

When you approach a provider of debt consolidation loans, your business’ finances should be in top form. The entire goal of getting an additional loan to consolidate your debt is to benefit from more convenient terms and to save money over the course of time. So, the better your firm’s financial situation, the more that’s likely to happen.

That is to say, as soon as you achieve a significant business objective, that is the perfect timing to consider debt consolidation. It goes without saying that you should use all your resources to portray your firm in a positive lighting.

To be clearer, here are some classic situations that will enhance your creditworthiness: your firm’s expenses have lowered significantly, you have monitored a significant revenue increase over a given time frame, you have successfully finished a busy season, or you’ve managed to file your most recent taxes.


  1. Your Business Has Become Experienced in Its Domain

Moving on, you should note that, the more years your business has been operating, the higher the chances to lock in a convenient loan offer. As a matter of fact, there are numerous lenders that have specific lending criteria, requiring businesses to operate for a given timeframe, such as 3 months, 6 months, one year and two years. Evidently, as your business ages, the number of financial opportunities you can choose from increases, as well.

To conclude, there are many reasons why you should consider debt consolidation loans. You can aim at diminishing your APR, while lowering your monthly payments, simplifying your cash flow management and allowing you to borrow more money. Plus, taking such a loan can help you to free up revolving credit lines. Nevertheless, in order to truly take advantage of these benefits, you should pick your timing most attentively.

Therefore, we believe that by considering the tips we presented above, you can choose your timing accordingly, and actually benefit from a debt consolidation loan. Of course, picking your lender carefully is just as mandatory. Debt Consolidation Loans is experienced in working with Aussies and coming up with lending solutions that address their individual needs.

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