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Wednesday, November 27, 2013

What are the best business debt relief options?

Businesses have a choice of several debt-relief options
Debt relief can save a business
By Angel Cruz

Businesses naturally take on a lot of debt in order to maintain inventory, pay staff and cover general operating expenses. It is not uncommon for a business to go from comfortably handling debt to suddenly struggling to pay creditors.

Every business is subject to changes in the local or national economy and other factors. In some cases, internal management difficulties can plunge a company into the red. During tough times a business may look for some fast relief in the form of a debt consolidation loan.

When to choose debt consolidation

Seeking business debt relief in the form of a consolidation loan is a better option for businesses with a ton of debt. This is a situation where numerous bills are taking a big chunk out of the budget. Monthly payments and interest rates are very high. Things are quickly spinning out of control. The business may be at risk of closing if this debt isn't handled soon.

SBA Loans

The SBA loan program has been expanded to make it easier for small businesses to gain access to money in a pinch. These loans are often the only option after being rejected for a bank loan. While the government guarantees SBA loans, there are specific requirements to qualify. There is also a lot more paperwork involved when filing an application.

7(a) Loan Program - This a popular type of loan that is available for all sorts of business uses. It is flexible, unlike other SBA loans.

Keep in mind that a business can be turned down for an SBA loan if they are perceived to be too much of a financial risk.

Debt consolidation company

There are numerous debt consolidation companies that loan money to cover business debts. Some are better than others. It is important to do thorough research on companies that appear to be the most promising. Securing a loan through a reputable debt consolidator means the business will be paying them on a monthly basis instead of several creditors.

These companies have various fees and payment plans. Before agreeing to a loan read everything and ask questions. Depending on your credit, fees and interest rates may be reasonable or high.

Home equity loan

With a home equity loan a business owner can borrow money against their home. This valuable collateral provides the lender with assurances that monies will be paid back. Often these loans give business owners a sizable amount of money that is used to pay off large debts. The downside is the borrower is at risk of losing their home should they default for any reason.

Private lender loan

Peer to peer lending companies make it possible for borrowers to receive money from individual investors. A business owner can secure a loan of up to $25,000. Payment terms and interest rates are normally fixed. There is usually a three to five year window to repay the loan.

Businesses that are looking for a faster way to get out from under debt may want to go this route.

Credit card transfer

Credit card debts can be consolidated onto one card for purposes of better managing debt. Balance transfer cards are advertised at zero to low interest rates. There is a fee for initiating the transfer. Read the fine print to ensure there are no hidden fees or rate hikes.

Money management

Regardless of the type of debt relief solution a business chooses, it is imperative to put in place a viable money management plan. Following a smart budgeting plan ensures that the business stays out of future debt trouble. This is the best way to grow a business in any economy.

When a business is struggling each month to pay numerous bills it is time to consider the various debt relief options available. It is important to research each option and determine which one, if any, provides a solid road back to financial stability.

About the author: Angel Cruz lives in New York and a professional guest poster. She writes about many financial topics including business debt relief. She wants to help as many people as possible manage their finances better.

Image license: Alan Clever, CC BY-2.0