Four Options for Business Debt Consolidation and Refinancing

Employer firms with between one and 499 employees make up 47.5% of the private-sector workforce and are labeled as small employer firms. As of 2020, 40% of small employer firms had an outstanding debt of up to $100,000.

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. Even businesses with bad credit need to take on new loans at times to stay afloat, but this can help to build good business credit.

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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 business debt or consolidate business debt, here’s our quick and dirty guide on how to make it happen.

In this article

    The 4 best business debt refinancing and consolidation providers of 2020

    • Dealstruck – Best for new businesses
    • Funding Circle – Best lender marketplace
    • SmartBiz – Best SBA loan
    • Streetshares – Best for veterans
     APRLoan AmountTermsKey Benefit
    Dealstruckstarting at 9.99%$5,000-$500,00012 – 48 months5- to 7-day funding time
    Funding Circle4.99%–27.79%$25,000 – $500,0006 – 60 monthsStreamlined online application.
    Smart Biz7.99%–24.99%$30,000 – $5,000,00010 – 25 yearsHigh loan amounts available.
    Street Shares9%–40%$2,000 – $250,0003 – 36 monthsWide variety of products available.

    Best for new businesses – Dealstruck

    Dealstruck is mostly for newer businesses — you only need to have been in business for a year to qualify for a loan.

    Fixed APR
    as low as 9.99%
    Loan Amount
    up to $500,000
    Term
    up to 48 months
    SimpleScore
    N/A / 5.0
    close
    SimpleScore Dealstruck N/A
    APR N/A
    Max Credit Line Amount N/A
    Draw Period N/A
    Resources N/A
    Fees N/A

    However, its APRs tend to be higher than other avenues — starting at 9.99%. Loan terms up to four years, and you get your funding in as little as 10 days. Loans are available for between $50,000 and $500,000.

    Quick processing and delivery of funding combined with the short business-life requirement of only one year make DealStruck a useful lender for new businesses. However, the above-average APRs with DealStruck can make it a riskier choice. New businesses often need to keep and reinvest as much of their earnings as possible, and the higher their loan payments are, the fewer earnings are available to put back into the business.

    Best lender marketplace – Funding Circle

    Funding Circle is one of the major stars of the fintech boom. Businesses can apply for a loan 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.

    Fixed APR
    N/A
    Loan Amount
    $5K–$500K
    Term
    3 months–10 years
    SimpleScore
    3.2 / 5.0
    close
    SimpleScore Funding Circle 3.2
    Median APR 3
    Loan Amount 4
    Product Variety 1
    Resources 5
    Fees 3

    Funding Circle offers the best marketplace for loans among these four companies and, as such, gives small businesses some of the best opportunities at finding a loan that they will be approved for. While the APRs tend towards the higher side, the quick turnaround on loans and breadth of its marketplace make Funding Circle a valuable option for small business.

    Best SBA loan – SmartBiz

    SmartBiz boasts the lowest rates of just about any online lender for small businesses — between 7.99%–24.99%.

    Fixed APR
    N/A
    Loan Amount
    $30K–$500K
    Term
    2–5 years
    SimpleScore
    3.4 / 5.0
    close
    SimpleScore SmartBiz 3.4
    Median APR 3
    Loan Amount 4
    Product Variety 3
    Resources 5
    Fees 2

    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 to 25 years.

    With an incredible range of loan amounts, from $30,000 to $5,000,000, SmartBiz is positioned to work with a great diversity of business sizes. While some of the application requirements make getting a SmartBiz loan tougher for smaller and newer businesses, the APRs and SBA backing makes it an excellent choice for those businesses that meet the requirements. The relatively lengthy loan terms can also help businesses by spreading out the payments into smaller installments.

    Best for Veterans – StreetShares

    Streetshares is a unique lender that caters to veterans and offers an APR range of 9%–40%. Its loans vary in size from $2,000 to $250,000 and use repayment periods ranging from three to 36 months.

    Fixed APR
    9%–40%
    Loan Amount
    $2K–$100K
    Term
    3 months–3 years
    SimpleScore
    4 / 5.0
    close
    SimpleScore StreetShares 4
    APR 4
    Max Credit Line Amount 5
    Draw Period 4
    Resources 5
    Fees 2

    The company totes the speed of its application and distribution of loans as one of their traits of excellence, saying that loans can be obtained within a “couple of days” of an approved application.

    When compared to the other three companies reviewed here, Street Shares offers average to worse APRs and below-average loan amounts, over a relatively short loan term. While the fast turnaround on the loan application can be vital for businesses, the high APR and short repayment periods can put business owners in a crunch until the loan is paid off. Street Shares requires that loan applicants be in business for a year or more and have at least $100,000 in annual revenue.

    What’s the difference between consolidating and refinancing?

    Both business debt consolidation and business debt refinancing seek to improve an indebted businesses’ financial position, one through streamlining and the other through savings. While consolidation simplifies a person’s debts, refinancing business debt aims to save money on payments. Despite somewhat different goals, debt consolidation and debt refinancing often occur together.

    Small business debt consolidation is when a variety of separate debts are compiled into one single debt, leading to a single interest rate and payment schedule to deal with. The goal of debt consolidation is to reduce the number of debts held. A reduction in interest paid is often sought after as well during debt consolidation, but it isn’t the primary purpose; instead, the objective is to streamline debt.

    Small business debt refinancing is a method of debt replacement wherein a new debt is taken on, at a lower interest rate, to pay off existing debt. A typical example is when businesses take out a new loan at a lower interest to pay off an old loan. The goal when you refinance business debt isn’t to limit the number of debts held but instead to reduce the overall cost of interest being paid.

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    How does small business debt consolidation work?

    Small business debt consolidation often comes in the form of a business consolidation loan that is then used to pay off existing debt. While these loans are often sizable, there are microloans for small businesses. This streamlines debt information and payments into one package and can also lead to a lower total interest amount paid on debts. As a result, this common form of debt consolidation is also a form of debt refinancing.

    As a 2020 Fed Small Business survey showed 40% of small employer firms have an outstanding debt of up to $100,000. This debt often comes from operation costs but is also frequently tied to investments made into those businesses, in the form of building improvements, equipment and other expenses. For each of those businesses, if their debts consist of more than one loan, they may be able to consolidate those debts into one. If they can secure a lower interest rate while doing so, then they’ll be refinancing as well.

    Not only does this process save businesses significant complications and stress around logistics, but it can save costs as well. Post-consolidation interest rates may be lower, but another significant factor is that fees and other costs are reduced by turning multiple debts into one debt. The first step in debt consolidation is to talk to a lender.

    Pros and cons of business debt consolidation

    ProsCons
    One monthly payment to one lenderNew application and pull on credit
    Typically means lower interest rateNew fees may apply
    Lower number of feesFormer lending benefits are revoked

    Methodology

    SimpleScore

    We’ve created the SimpleScore to help you objectively compare products and services here at The Simple Dollar.

    Our editorial team:

    • Identifies five factors to compare across each brand
    • Determines the rating criteria for each factor
    • Calculate an average of those five factor scores to get one SimpleScore™

    We break down each of these five factors and their rating criteria for our review of the best auto loan companies of 2020.

     

    Why do some brands have different SimpleScore on different pages?

    Some brands offer a variety of financial products, which is why they have different SimpleScores on different pages. We rate individual products that brands offer — not the brand as a whole. 

    For instance, in our American Express personal loans review we rated the company a 4.25 out of 5 based on rates, loan amount, customer satisfaction, customer support and fees. In our review of the best small business loan rates, American Express earned a 3.4 out of 5 SimpleScore based on its business loan product. By tailoring our SimpleScore to each financial solution, we’re able to give you a more accurate view of each brands’ services and how they compare to competitors’ products.

    Median APR

    Lenders with a lower median APR are awarded higher scores — because even if you’re APR is average, your business is not.

    Maximum loan size

    Lenders that dole out loans with high maximums are also rewarded with higher scores. It takes money to run a business, and businesses need access to as much capital as it takes.

    Product variety

    Need more than just a business loan? Lenders that offer more than one type of financial product for businesses score higher than others that don’t.

    Educational Resources

    We gave out higher scores to lenders that have the following subjects covered in their blogs: loans, marketing, employee and staff, and credit or finance resources.

    Fees

    Fees can add up fast and eat into operating costs –– that’s why we give a higher score to lenders that have fewer fees.

    Joshua Cox-Steib

    Contributing Writer

    Joshua Cox-Steib is a personal finance contributor. He lives in Tulsa, Oklahoma, with his wife and their three pets. He spends his spare time reading, writing, and gardening. Find out more on Joshua Cox-Steib at www.jcswriting.com.