Gettin’ Outta Debt: How to Consolidate Your Business Loans
Hey there! If you’re a business owner strugglin’ under a mountain of debt, I feel ya. Been there myself a few times over the years tryin’ to get my little bakery up and runnin’. But consolidatin’ all those high-interest loans into one new loan with a lower rate can be a total game changer. So let this laid-back dude walk ya through exactly how to make it happen.I’ll keep it real simple and avoid any fancy financial mumbo jumbo. This is just one business owner to another havin’ a casual chat about what worked for me. And hey, if you got any other questions along the way, just holler.Alright, let’s dive in!
Step One: Gather Up All Your Loans and Do Some Math
First things first – ya gotta get organized. Make a big ol’ list of every business loan you got right now. For each one put down:
-- The original loan amount
- The interest rate
- Monthly payment amount
- Number of months left to pay
Once ya got it all down in black and white, add up the total remaining balance across all the loans. Ugly number ain’t it? Now multiply that freakin’ number by your average interest rate. That’s around how much extra dough you’re gonna have to fork over if ya keep things as-is. Gross.But if consolidate, you get it all neatly wrapped up into one new loan with a much lower interest rate. Now we’re talkin’!Alright, now we know why we’re doin’ this. Let’s move onto…
Step Two: Check Your Credit Score
How’s your credit score lookin’ these days? Be honest now. To get approved for a consolidation loan you’ll likely need at least a 680. But shoot for 700+ if ya can.If you’re score’s in the crapper, here are some quick tips to give it a boost before applyin’:
- Pay down balances on credit cards and other revolving debt
- Hold off on applying for new credit cards or loans
- Pay all bills early or on time
A few months of that should help bump ya into an approvable range. Once you’re set, let’s move onto…
Step Three: Choose a Consolidation Lender
Now here comes the fun part – pickin’ a lender to handle consolidatin’ all those loans for ya! Most banks and credit unions offer consolidation loans these days. But make sure to shop around a bit before decidin’.Some stuff to compare:
- Interest rates (duh!)
- Loan terms
- Fees
- Customer service reviews
I’d start by checkin’ rates from online lenders like LendingClub and Lightstream. If you’ve banked locally for awhile, see what your bank/credit union can offer too.If ya find a lender ya like but their rate ain’t the lowest, try negotiating! Send ‘em the other loan estimates you got and ask them to beat it. Works more often than ya think.Once ya find the lender with the best overall deal, it’s time to…
Step Four: Apply and Get Approved!
The application itself is preeeetty straightforward. They’ll wanna verify all those loans ya listed out earlier and make sure your income/revenue can support the new consolidated payment.Oh, and they do pull your credit when ya apply – but it’s just a soft check so no need to worry about another ding. If ya get denied don’t sweat it. Just take some time to boost your score and income a bit then try again in 6 months or so.But if all goes smooth – congrats!! Now just sign your loan docs and wait for that sweet, sweet direct deposit into your business bank account. Don’t forget to immediately pay off all the old loans so they’re marked “paid in full” on your credit reports.Once that’s done, go treat yo self to a nice steak dinner or somethin’. You earned it!
Step Five: Make Payments and Watch Your Savings Grow
Not gonna lie – it feels preeeetty dang good makin’ that new lower consolidated loan payment each month. All that money you’re savin’ in interest can now go toward other important stuff – retirement funds, new equipment, or just plain profit.I like to take my monthly savings and split it up:
- 50% goes back into the business
- 30% goes toward my personal retirement
- 20% is my “hot tub fund” (hey, I gotta treat myself sometimes too!)
Adjust those percentages however ya want – it’s your cash after all. But definitely put a chunk toward retirement. Your future self will thank you big time.
Step Six: If Needed, Reconsolidate in a Few Years
Hopefully your new interest rate is rock bottom and you won’t need to consolidate again anytime soon. But if rates drop a lot over the next few years, don’t be afraid to reconsolidate for an even better deal!Just make sure ya do another round of rate shopping first rather than taking the first offer that comes along. If their rate beats your existing loan by at least 1-2% then move forward with the reconsolidation application.Lather, rinse, repeat as many times as rates keep droppin’! But if they start creepin’ back up just stick with what ya got.
Wrap Up
Whew, we covered a lot of ground there! But see, consolidatin’ all your crazy business debt ain’t so bad. Just takes a bit of number crunchin’ and shoppin’ around to find the best loan for ya needs.And don’t get discouraged if ya don’t qualify right out the gate. Boost that credit score and income for a few months then try again. You’ll get there!Until then, feel free to holler if any other business finance questions pop up. I may not be a fancy banker or whatever, but I’ve sure learned a lot runnin’ my little bakery all these years. Happy to pass along any tips that might help ya out too!Now if ya don’t mind, all this money talk got me cravin’ one of my famous cinnamon rolls. Think I’ll close up early and treat myself to a pan fresh out the oven. Hey, I can afford it now thanks to consolidatin’!