As of 2012, there were 5.73 million businesses with fewer than 500 employees. What’s more, 30% of all jobs in the United States economy are currently held by the self-employed. What this means is that there are tons of Americans running their own businesses. And, in doing so, they might have taken on some debt to keep things running.
Just as no one plans to get over their head in personal debt, no one plans to get over their head with business debt, either. So if you need to know how to refinance or consolidate your business debt, here’s our quick and dirty guide on how to make it happen.
What’s the Difference Between Consolidation and Refinancing?
First, let’s define terms. What is the difference between consolidation and refinancing? Consolidation is when you bundle all of your existing strands of debt into one single loan. That might or might not involve a lower interest rate, but it is not, strictly speaking, refinancing. On the other hand, refinancing will leave your existing lines of credit, loans, and whatnot in place as they are, just at lower interest rates than you’re currently paying.
It can be hard to consolidate or refinance if you have a lot of high-interest loans from multiple sources. Fortunately, as financial tech (aka fintech) services and other forms of online lending grow more prevalent, the marketplace is far more open than it once was. Here are a few options to consider if you need to consolidate business debt:
If you own a larger small business, Fundation is probably your best bet, especially if you need quick cash. You can get loans between $20,000 and $500,000, and the APR will run between 8% and 30%. You’re also required to have at least three employees — one of which can be you — and at least $100,000 in annual revenues. So like we said, this is mostly for larger, more established businesses, but it can be a viable option if you fall into that category.
DealStruck is mostly for newer businesses — you only need to have been in business for a year to qualify for a loan from these guys. However, their APRs tend to be higher than other avenues you might be considering — between 10% and 28%. Loan terms range from six months to four years, and you get your funding in as little as 10 days. Loans are available for between $50,000 and $500,000.
SmartBiz boasts the lowest rates of just about any online lender for small business — between 7% and 8%. You need to have an established business with a good cash flow to qualify, but rest easy, because these loans are backed by the Small Business Administration. There’s a lot of paperwork here as well, which might deter you, but the interest rates are hard to argue with. Loan terms are 10 years.
Funding Circle is one of the major stars of the fintech boom. They can get you a loan of between $25,000 and $500,000 with an APR between 8% and 33%. The loan terms run from one year to five years and you can get funding within 10 days. Most loans through Funding Circle are used for expansion, but you can use your funding from them to consolidate your existing loans and help you to get out of debt using a lower interest rate.
These are four of the most popular and, in our opinion, best options out there for business debt consolidation and refinancing. Start there, then look elsewhere if not satisfied.