Small businesses struggling with short term loans and high interest rates can significantly reduce their monthly payments with a consolidation loan. To find out how much you might save, enter your existing loans into our small business debt consolidation calculator. The calculator will show you how much lower your monthly payment could be by consolidating your business debt with either a small business term loan or an SBA loan.
Our thanks to Able Lending for sponsoring this article.
How the Small Business Debt Consolidation Calculator Works
The small business debt consolidation calculator will help you calculate the potential monthly savings your business could see by consolidating your business loans. Simply input your existing debt and monthly payments, add any additional borrowing you need, and the calculator will estimate the total consolidation loan size and monthly payments for both term loans and SBA loans.
While nearly any business debt can be refinanced, the largest benefits from consolidation come from lowering interest rates and extending the length of your payment terms. The three types of small business debts that are commonly consolidated are:
A small business consolidation loan can lower your monthly payments and free up additional cash flow for your business to use elsewhere. Another benefit of a consolidation loan is that it can replace multiple debts with one simple loan that has a single monthly payment. No more juggling multiple payment dates. No more weekly or daily repayment schedules.
Small business consolidation loans typically come in two forms:
- SBA Loan
- Term Loan
SBA loans typically have the long repayment terms, usually 10 years or more. And SBA loan interest rates are some of the lowest available to small business owners. But SBA loans can be slow to actually get you funded and hard to qualify for. Term loans typically have very competitive rates and repayment terms of up to 5 years. Plus they can be easier to qualify for and get your business funded much more quickly.
Will I Qualify for a Consolidation Loan?
The table below breaks down the general qualifications and terms of each of the two common consolidation loans for small businesses.
Consolidation Loan Comparison: SBA vs Able Lending
|Term Loan |
from Able Lending
|Business Revenue||$100,000+||$120,000+ and trending up|
|Time in Business||1+ Year||2+ Years|
|Payback Time Period||1 - 5 Years||10 Years|
|Loan Amounts||$25,000 - $1,000,000||$30,000 - $5,000,000|
|APR||Average is 16%||6% - 9.5%|
|Origination Fee||5%||0 - 4%
SBA Guarantee Fee of 3 - 3.5% on loans above $150K
|Time For Approval||Prequalify in minutes, approved in 5 days||As quick as 1 week|
|Time to Receive Funds||Within 1 week of of your backer’s funds being raised||Typically 60-90 Days|
|Visit Able Lending||How to Apply for an SBA Loan|
While an SBA loan typically offers the lowest monthly payments, you must endure a lengthy process to obtain one. Part of the involvement required in the process is the amount of paperwork that is typically filled out. Let’s take a look at what documents are generally required for each type of loan.
Documentation Required to Consolidate Small Business Loans
SBA Loan Consolidation Required Documentation
Here is a general list of documents required for an SBA loan:
- Business Financials (past two years)
- Profit and Loss Statement (past two year and YTD)
- Projected Financials (looking forward 1-3 years)
- Ownership Information
- Business Tax returns (past two years)
- Personal Tax Returns (past two years.
- All Business Licenses
- Business Overview and History
- All Business Leases
- Loan Application History
- Resumes of Owners
This does not include the SBA forms that are also required. It also does not include additional documents needed for your specific financial situation (like if you own rental properties or other businesses).
Able Lending Loan Consolidation Required Documentation
Here is a list of documentation typically required for a term loan through Able Lending:
- Statement of Cash Flow (1 year)
- Bank Statements (2 months)
- Income Statement (two years, if applicable)
- Balance Sheet (YTD)
- Credit Check
The documentation, as you can see, is much less with Able Lending than it is if you go through the SBA loan process. Able Lending also requires you to raise money from your friends and family. The loan amounts vary based on your unique financial situation. You can learn more about that process by reading our article How to Refinance Business Debt in 3 Steps.
Monthly Payments vs Total Cost of Capital
Many small business owners may think that the lowest interest rates are always going to give them the lowest cost. While that’s generally right when it comes to the monthly payment, it often is not the case if you are looking at how much the loan actually costs during the entire term of the loan. This is often referred to as your total cost of capital.
Sometimes a loan with a higher interest rate has a cheaper total cost of capital than a low interest rate loan because of the length of repayment. Let’s look at an example:
Loan Consolidation Total Cost of Capital Example
|Business Debt Consolidation|
with Able Lending
|Business Debt Consolidation
with an SBA Loan
|Total Cost of Capital||$132,876||$139,200|
|Repayment Term||3 Years (1-5 Years)||10 Years|
Your monthly payments would be higher in the Able Lending example, but you will end up paying more in total with the SBA loan. When you are looking to consolidate your business loans make sure you balance the benefits of a lower monthly payment with the expense of higher total cost of capital.
If your business currently has high interest debt with short repayment terms and weekly/daily repayment periods, consider consolidating your loans. A small business consolidation loan gives you just a single monthly payment to worry about and will likely mean much lower monthly payments.
An SBA loan will generally give small business owners the lowest monthly payments but also be the most difficult to qualify for and be slow to fund. A term loan typically has lower qualification requirements and faster funding times than an SBA loan which means you’re more likely to get relief from high interest debt in a shorter amount of time.