A debt consolidation loan can help lower your monthly payments — or at least simplify the repayment process — by transferring your existing balance to a new lender. You may even be able to reduce the overall cost of your debt by consolidating at a lower interest rate.
But it’s not for every business. You’ll need to meet minimum revenue requirements to qualify with most lenders. If you don’t take the time to compare deals, you may also be stuck with more debt and worse terms.
Here’s how business debt consolidation works — along with three options your business should consider.
Simplify payments with a business debt consolidation loan
Business debt consolidation loans allow you to combine your debts into one loan. Term loans, credit cards and merchant cash advances all qualify.
It can be beneficial if your business qualifies for a more competitive interest rate. But you can also use debt consolidation to make it easier to keep track of your business’s cash flow or adjust your monthly payments
3 small business debt consolidation options
Depending on the type of debt your business has — and its overall financial situation — you should look into a debt consolidation loan from one of these three sources.
Bank loans are a classic choice for consolidating business debt. They typically offer low interest rates and competitive terms.
However, only strongly established businesses with owners who have strong credit will qualify. Small business owners who don't meet the strict criteria of a bank should look elsewhere for funding.
Chase business term loans
3 / 5
Chase is a national bank with large business loans up to $500,000 — but it does have some drawbacks. You'll need to be a current business customer and you have to apply at a branch. That being said, it's still a good option when compared to other banks that offer smaller business loans. If you're looking to consolidate, Chase is one of the better lenders out there.
- Large business loans up to $500,000
- Lines of credit and SBA loans also available
- Not upfront about costs
- Must apply at a branch
- Must hold a Chase business checking account
|Loan amount||$5,000 – $500,000|
|Loan Term||12 to 84 months|
|Requirements||Hold a Chase business checking account, have a realistic business plan and visit a Chase location in person.|
Small Business Administration
The Small Business Administration (SBA) offers unique business loans that can be used for debt consolidation. They typically have lower interest rates than similar loans and are made through a trusted financial institution like a large bank or online lenders.
But SBA loans aren't a quick option for debt consolidation. The application process is intensive, and it may take months for your loan funds to be available.
SmartBiz business loans
4.5 / 5
SmartBiz is an online marketplace that can connect your business with funding backed by the SBA. The SBA sets interest rate caps for most loans it backs, meaning you're less likely to be over charged. And while SBA loans might come with a mountain of paperwork, SmartBiz helps businesses navigate the complicated forms and can save you some serious time — for a fee.
- SBA loans up to $5 million
- Low annual revenue requirement
- Non-SBA funding also available
- Charges packaging and referral fees
- May face prepayment penalties
|Loan amount||$30,000 – $5,000,000|
|APR||4.75% to 7%|
|Loan Term||10 to 25 years|
|Requirements||650+ personal credit score, US citizen or permanent resident, 2+ years in business, $50,000+ annual revenue, no outstanding tax liens, no bankruptcies or foreclosures in past 3 years|Go to siteon SmartBiz's secure site
|Loan amount||$30,000 – $5,000,000|
|APR||4.75% to 7%|
|Min. Credit Score||650|
Business loans through alternative lenders may not offer the most competitive interest rates out there, but they are easier to qualify for than a bank loan or SBA loan.
Small business debt consolidation with an online lender is the same as through a bank or credit union — with the added benefit that the process is generally quicker. Your business will still need to meet the minimum criteria set by the lender, but it could be easier to qualify with a newer business or lower revenue.
Funding Circle business loans
4.4 / 5
Funding Circle is a peer-to-peer lender that offers term loans you can use to consolidate your business debt. You might want to pay particular attention to this lender if your business doesn’t bring in enough money to qualify for other debt consolidation loans — it doesn’t have a minimum revenue requirement. It’s also faster than some of its peer-to-peer competitors. You could get approved in as little as 24 hours and get your funds five days later.
- Accepts fair credit
- Large loans up to $500,000
- Customer service gets positive reviews
- High origination fee
- Comparatively long turnaround time
- Relatively high minimum loan amount
|Loan amount||$25,000 – $500,000|
|APR||Starting at 4.99%|
|Loan Term||3 to 120 months|
|Requirements||660+ personal credit score, 2+ years in business, for-profit business in an approved industry, not located in Nevada|Read review
|Loan amount||$25,000 – $500,000|
|APR||Starting at 4.99%|
|Min. Credit Score||660|
Benefits: Improve cash flow and eliminate multiple creditors
Because business debt consolidation loans free you from your obligation to multiple lenders, you may be able to reap quite a few benefits once your debt is together.
If your business has increased its revenue or you want to make the bookkeeping process easier, then it could make sense to consolidate your debt where you can.
Business debt consolidation can help you lower your interest rate — especially if you've taken out short-term business loans in the past. By combining your debts into one monthly payment, you could end up pay less total interest over the long term.
Multiple debts with varying interest rates can be difficult for small business owners to keep track of. Business debt consolidation simplifies the repayment process because you'll only have one loan. Repayment becomes predictable, which will make it easier to plan your business’s finances.
If you have a business credit card or line of credit, consolidating your debt can free up your credit limits. This is useful for businesses that have a solid revenue and cash flow. But keep in mind that drawing more from your credit card or line of credit just adds more debt for your business to repay.
Both you and your business have a credit score. Business debt consolidation may help you increase yours by showing a positive payment history and restructuring your business debt. It can be bad in the beginning, though — when you pay off accounts, your credit score may take a small hit before it gets better.
Drawbacks: Won't solve cashflow problems
But a business debt consolidation loan isn't always the right choice. If your business is already struggling to meet its debt obligations, you'll only be transferring from one lender to another — if you're approved at all.
Worse, you might face a higher cost if you aren't able to lower your total annual percentage rate (APR) across all your business debt.
- Total debt stays the same
Business debt consolidation can make it easier for your business to manage its money and make payments, but that won’t change the amount it owes. If you already have a large amount of business debt, debt consolidation will only shift your creditor, not change your outstanding balance.
Increasing your loan term might save you on monthly payments, but it also increases the total cost of your loan. The best debt consolidation loans will have a lower interest rate to make your debt more affordable. If you do opt for a longer loan term when you consolidate your debt, be sure the new loan won't cost more than its worth.
- Personal guarantees required
Almost every business loan requires a personal guarantee from the owners. This means that you’re responsible for paying off the debt if your business can’t. And since debt consolidation loans are typically for a large amount, you need to make sure your small business can afford it before you put your personal finances at risk.
Consider debt consolidation if you check these boxes
Every business is unique — and that means we can't say for sure if consolidating business debt is the way to go. But small business debt consolidation can be useful if your business checks one or more of these boxes.
Just be sure to consult with a financial advisor before you take on a debt consolidation loan.
Your small business has high-interest loans
Small business owners may need to take on high-interest debt during the first few years. But once you've established yourself, you could snag a lower interest rate and end up paying less through business debt consolidation.
And if you took out a merchant cash advance or other short-term business loan with a daily or weekly repayment schedule, taking on a new loan not only means lower interest rates but also a monthly payment — which is the best way to preserve your cash flow.
You want to lower your monthly payment
Even if your business isn't able to get lower rates, a debt consolidation loan with a longer loan term can help free up cash and eliminate the need to take on more debt for working capital.
The money you save every month needs to be worth it, though. If your existing loans have lower fees and your business can handle the debt, it doesn't make sense to consolidate your debt into one payment just to pay a little less.
Your business has stronger finances
Business debt consolidation is a good choice for small businesses that have improved their financial standing since taking on some initial debts. Higher revenue typically means that your business is eligible to handle more debt and qualify for better rates than it had before.
You’ve reached the one-year mark
Young businesses frequently have a hard time qualifying for funding, let alone competitive rates. Consolidating after your business reaches the one-year mark can help your business save money on any high-interest debt it took on during its startup phase.
Your personal credit has improved
A lender will consider the owner’s credit score when a business applies for funding. If your credit has improved since your business first took on debt, a lender may offer a lower APR. This is important because most lenders will ask for a personal guarantee. So the better off you are, the better off your business will be when it applies for a business debt consolidation loan.
How to get a business debt consolidation loan
The process is similar to other business loans. You'll need to prepare your application, compare lenders and ensure your budget can handle the combined payment after you consolidate.
1. Determine loan amount
Go over your debts and check the total payoff amount for each. This is the amount you need to borrow. Then take it a step further and calculate the amount you'll pay with a new loan. If it's higher than what you'd pay each lender individually, it may not be worth it — especially if you won't have much day-to-day relief when paying bills.
2. Check your business and personal credit score
Your credit scores determine which lenders you can work with. The better your score, the better your chances of working with a strong lender that offers a competitive APR. But even if you have bad credit, you may still qualify for a debt consolidation loan.
3. Compare and consult lenders
Banks and larger online lenders are a good place to start your search. Confirm that debt consolidation is an option. Some may restrict businesses from using their funding to pay off other debts.
4. Prepare financial documents
Contact the lender's underwriting team to determine what your business will need to submit. This typically includes your:
- Business plan
- Current debts
- Sales projections
- Personal and business tax returns
- Profit and loss statements
- Balance sheets
You may also need to supply proof of ownership and other documents during the application process.
5. Submit an application
Once you prepare your application, submit it to your lender through its online portal or in person. Your lender will review your information and determine if your business can handle debt consolidation.
6. Review and finalize your loan
If you're approved, review your loan documents and confirm that your loan is a good fit for your business. Make sure it either reduces the total cost or lowers your monthly payments.
7. Budget for new loan payments
Finally, adjust your budget to account for the single monthly payment your business will need to make. Although business debt consolidation can improve your financial situation, it does mean that you'll be stuck with one large payment as opposed to multiple small ones. Ensure you have the money available to pay your new loan on its due date each month.
Business debt consolidation vs. refinancing
Debt consolidation involves multiple debts — debt refinancing only involves one.
Refinancing can help you save on interest if your business qualifies for a more competitive APR. But it isn’t as useful if your business has multiple debts that it’s struggling to pay off.
Some lenders use refinancing and consolidation to refer to the same general process. In this case, you may be able to use the loan to pay off one or more debts.
Frequently asked questions
A few quick answers to some common questions about small business debt consolidation.
Will business debt consolidation hurt my credit score?
It could. Because your lender may also check your personal credit, you may see a slight hit to your score when you apply for a business debt consolidation loan. And it may have another small hit when you close out multiple accounts to replace it with just one loan.
This is a temporary drop. Once you start making payments toward your new loan, both your personal score and your business credit score should bounce back.
Can I consolidate my business's debt with bad credit?
While you technically can, it will be difficult to make it worth the switch. Since you're unlikely to be approved for a competitive APR with bad credit, you may end up paying more money if you consolidate your business debt.
Check out lenders like Fundation that put less weight on your personal credit score and focus on your business’s performance. Even if you don’t get lower rates, you could benefit from a longer term if you’re struggling to make weekly payments on short-term loans.
How long does it take to consolidate debt?
It depends. While online lenders and some banks are able to process and fund applications within a few business days, an SBA loan could take months.
Larger loans also typically take more time to process since your lender will need more time reviewing your application.
Can I consolidate business loans and credit cards with the same loan?
Yes, you can use small business debt consolidation for multiple types of debt. In fact, some lenders may let you borrow more than your outstanding debt and use the remainder to cover other business expenses.
Consolidating your business debt into one loan can be a useful way to manage its finances. It can cut down on the short- and long-term costs of your loan, help you save by giving you a lower rate and make your monthly payments easier to keep track of.
But if your business is really struggling to pay off debt or doesn't have a strong financial foundation, you're unlikely to qualify for rates and terms that reduce your overall cost.
Summary of business debt consolidation options
Finder Rating: 3 / 5
|Find out more|
$5,000 to $500,000
12 to 84 months
Hold a Chase business checking account, have a realistic business plan and visit a Chase location in person.
Finder Rating: 4.5 / 5
$30,000 to $5,000,000
4.75% to 7%
120 to 300 months
650+ personal credit score, US citizen or permanent resident, 2+ years in business, $50,000+ annual revenue, no outstanding tax liens, no bankruptcies or foreclosures in past 3 years
Finder Rating: 4.4 / 5
|Find out more|
$25,000 to $500,000
4.99% to 38.43%
3 to 120 months
660+ personal credit score, 2+ years in business, for-profit business in an approved industry, not located in Nevada