More often than not debt consolidation has proved to be the best option for the startups to manage their debts, stay away from further obligations as well as be more organized in their finance and business management.
Ideally, the workload on startup businesses is much more as compared to the established business and given the fact that these businesses always start their journey small, there are high chances that they will face financial crunches soon, especially during their initial year.
When you want to run your business independently, you will necessarily need a lot of guts, foresight and of course the required funds. If you do not have enough funds, then you should at least know about the resources from where you can arrange it to meet with the necessities. These are the perfect ingredients that will ensure the desired outcome.
However, when things do not fall into place, it haunts your mind and adds to your headache. When you have several creditors at the door to repay each having varying loan amounts and rates of interest, the situation seems to be more profound, crucial and grim.
You will lose focus and fail in organizing and running your business correctly having to continually concentrate on how you will pay your creditors every month. Slowly, these debts will grow up in volume, and a point will come when these will claim more critical than your primary business. Therefore, it is paramount that you look around for other alternative ways that will help you to manage your debts effectively and helps you stay focused and organized.
Debt consolidation tips
It is always a better idea to manage multiple debts with a debt consolidation loan. There are several reasons for it such as:
- This loan will not affect your credit score in any way much unlike the negotiation and bargaining with your creditors may. Your credit is affected because the creditors will report to the credit bureaus about your conversations and then that information is reflected in your current credit record.
- They might not reduce your interest rate as well which is a certainty in case of a debt consolidation loan. That means you will have lower monthly payments to make and that too to a single creditor.
- Having less money to pay and not worry about making arrangements for money, you will have more time for your business. Having the mental peace, you will be able to stay more focused.
You will be more organized with your business operation, finance and management and even make your monthly payments on time. Some of the opportunities provided by this type of loan forces you to be organized. These types of loans include:
- You will hit the bull’s eye when you take this type of loan, secured or unsecured, by prioritizing your bills and payments.
- You will stop using credit cards that usually charge an excessive amount of interest and even if you do you will make proper plans to pay them off soon.
- You will also check on your utility bills at some point or the other and make sure that there is no misuse of energy to raise the monthly bills. You may even contemplate on introducing “earth hour” at your office premises if required.
- You will be knowledgeable about your income, your expenses, taxes, and payrolls and make these payments as and when they accrue.
All these will ensure that you have enough money in hand at the end of every year. For more information and assistance in your business debt management, you can take help from Nationaldebtrelief.com and other sites as well.
Factors to know to avail debt consolidation loan
Debt consolidation needs careful consideration of the elements and proper knowledge about the features and its requirements.
- To start with you must know that you have all the right and responsibility to consolidate your debts before these start to go out of control.
- You will also have to make way for the administrative, management, and accounting parts of your startup
- You may outsource your debt worries to another firm but will have to make sure that it is reliable and capable of working on your behalf.
You will also have to consider the different criteria for eligibility of such loans and fulfill it to procure the loan from a leading consolidating firm. These criteria include having a credit score of around 500 or more and a business that is not less than six months old. Apart from that, your business must have some substantial annual turnaround and proper documents to substantiate it.
These criteria can vary from one firm to another and most importantly, banks and credit unions will have stringent regulations to follow to acquire such a loan from them. They will want a year old business and a personal credit score of 650 and above for that matter.
A word of caution
A debt consolidation loan will come with its own sets of benefits. These benefits lower monthly payments as these have a lower rate of interest, and extended time frame for its repayment, get some more time to be more organized and even have some extra cash in hand after making payments of all your existing loans.
However, these benefits may be known to you but what you may not know is the task you have to follow on post-consolidation days.
- First of all, you will need to be committed towards your business finance management and make sure that you keep your credit card based transactions to the minimum possible rate, or even avoid it altogether at least till the time you pay off your debt consolidation loan.
- Make sure to designate a few specific areas where you may use your plastic money so that you do not end up incurring another huge debt along with your debt consolidation loan running.
- It is essential that you make all arrangements to pay back this loan on time as it will drastically affect your credit score if you fail to make a payment.
Like it is said earlier, managing your debt is accessible only if you are organized and committed to it.