The most important consideration when seeking small business debt relief is whether you plan to continue to operate your business. If you do, it is essential that you find debt relief that preserves your personal and business credit. Consolidating or refinancing your business debt can result in a lower APR, longer repayment terms, and less frequent payments. Obtaining a consolidation loan may be easier than you imagine and offer the debt relief you’re looking for. If you do not plan to continue operating your business, debt relief will be about eliminating debt while protecting your personal assets.
Our thanks to Able Lending, who sponsored this article. If you’re currently struggling with high-interest debt or high-frequency repayment schedules, refinancing your small business debt may be a great option. With rates as low as 8% and terms up to 5 years, Able Lending can have you funded in as quick as 1 week. Their application process is easy and 100% online. Prequalify for up to $1,000,000 in minutes.
1. Rework Your Budget
Before you pursue any small business debt relief options, make sure you’ve optimized your budget. Knowing every expense within your budget will help you identify ways to improve your cash flow and help you meet your debt obligations. You should look for the following opportunities to improve your cash flow:
- Eliminate Unnecessary Expenses
- Look at Increasing Your Prices
- Consider Promoting Higher Margin Products or Services
Eliminate Unnecessary Expenses
The first step in reworking your budget should be to pull out every expense that is a necessity in keeping your business going. While you can’t get rid of these necessary expenses, all other expenses can possibly be eliminated to help you improve your cash flow. Prioritize the expenses that are not a necessity and start eliminating them beginning with the least important.
This is generally a good short term solution to help you manage your debt payments, even if you don’t see enough debt relief to solve all of your problems.
Look at Increasing Your Prices
Do a quick market study to determine if you have certain products or services that you might to charge more for. If you aren’t going to lose customers and your prices will still be competitive in your market, then increasing your prices can provide an immediate boost in revenue. This additional revenue can be earmarked specifically for your small business debt relief efforts.
Promote Higher Margin Products or Services
If you are selling a lot of products that have low margins, you might want to consider if there are higher margin products that you could promote. Increasing the sales of higher margin products/services will improve your bottom line and give you more cash to tackle debt relief efforts. Promoting higher margin products /services is unlikely to upset your existing customers or your creditors. It my even bring in new customers.
2. Negotiate Terms with Creditors & Trade Partners
Revisiting the terms you have with suppliers and trade partners can also play a role in small business debt relief.
Negotiating with your creditors and trade partners doesn’t have to mean a default on your business’s debt. Simply requesting small changes in payment scheduling or interest rate can make a huge difference in your business’s ability to handle its debt. The best time to do this is before any default.
“Creditors that are being avoided, or that are not told the truth up front, are less likely to work with you” said Al Levi, the author of the 7-Power Contractor. “Many creditors would love to work out a payment schedule or a deal that will work for you because both parties benefit from doing so. The key is to stay in front of the situation. Make sure you communicate with your creditors before you default, if at all possible.”
Let’s look at four possible items you can negotiate to get relief from your trade partners.
- Adjust Payment Due Dates
- Increase Repayment Terms
- Receive More Favorable Terms From Trade Partners
- Seek Flexibility From Landlord
Adjust Payment Due Dates
Your creditors might be flexible with regard to your payment due date.
Having a large amount of debt payments due at the same time can hurt your cash flow. It can make it difficult to meet all of your debt obligations and increase your need for expensive, short term borrowing. While we may not think of it as business debt relief, simply adjusting your payment due date may actually help you alleviate your business debt issues.
Keep in mind, your creditors and trade partners have a very real stake in your business’s ability to avoid a default. If a payment due date is creating a cash flow problem that causes strains on your business, they would probably rather change the payment date than not receive a payment at all.
Increase Repayment Terms
How much time you have to repay a loan directly impacts the size of your regular payments. By extending the repayment terms, you can lower your regular payments. If you can get your creditors to agree to a longer repayment term, you may be well on your way to solving your business debt problem.
Note: While extending your repayment terms can help your cash flow in the short term, it might also increase your total cost of capital. That’s because you may end up paying interest on your business loan for a longer period of time.
Receive More Favorable Terms from Trade Partners
You can negotiate directly with your trade partners to adjust your current payment terms. They may offer you 30, 60, or 90 day terms if you have a history of paying on time. If you don’t currently have net terms, see if they’ll extend them to you but keep in mind that they may charge you a little more to do so.
Seek Flexibility from Landlord
If you have a good relationship with your landlord, you may be able to negotiate some flexibility in your current payment terms. You may get the landlord to lower your payments or even defer them for a few months. Landlords do not typically like looking for new tenants. Usually, they would rather work with their current tenants and continue receiving rent payments on a timely basis.
Also, landlords that aren’t large corporations may be more familiar with your business and sensitive to local economic issues. This may mean they are willing to lower your payments, or defer part or all of your payment for a period of time to help you with your cash flow.
3. Small Business Debt Relief Through Consolidation & Refinance
If you want to continue to operate your business, then defaulting on your current debt is not a viable option. Most small businesses seek debt relief from high-interest loans that require daily or weekly repayments. While this debt is typically taken out to solve a short term problem, it can make it very difficult for your business to get ahead. Refinancing those short term loans with a longer term, lower interest rate loan can reduce your monthly payments substantially. Use our small business debt consolidation calculator to see what your payments might look like.
SBA loans and alternative term loans are the two primary options for small business owners looking for debt relief. Here’s what you need to know about each option.
SBA loans typically offer the lowest rates and longest repayment terms available to small business owners. For that reason, they’re often the most affordable way to find debt relief. However, SBA loans also have very high minimum requirements, including:
- In business at least 2 years
- Personal credit score is 680+ (check your score for free here)
- Seeking at least $30,000
- At least $120,000 in revenues for the past 12 months
- Business is profitable
- Often need real estate as collateral (usually 50%+)
Not only are the minimum requirements very high, there is a great deal of paperwork involved with applying for an SBA loan. In fact, they can take upwards of 3 months to get funded. However, you can’t beat a 10 year term and interest rates around 6.5%. So if you meet the requirements and can wait a couple months for the refinancing, learn more about SBA loans here.
Alternative Term Loans
Alternative term loans are another good option. They often have repayment terms of up to 5 years and interest rates in the mid-teens. That makes an alternative loan a much more affordable option than the high-interest, short term debt that gives so many business owners headaches. Not only that, but the minimum requirements are much lower than an SBA loan and the loan can be funded in a fraction of the time. Typical minimum requirements include:
- In business 1+ years
- Personal credit score is 600+
- Seeking at least $5,000
- At least $25,000 in annual revenues
- Business is profitable
There are a number of alternative term loan providers out there. Most advertise the ability to work with businesses in less than perfect shape, but in reality they are typically looking for prime borrowers. That’s not much help to someone seeking debt relief.
One company that is able to work with small businesses that need debt relief to get back on track and grow their business is Able Lending. We’ll take a closer look at their refinance program below.
Consolidating Business Debts with Able Lending
Able Lending makes business debt relief through refinancing possible by leveraging the support of your biggest fans. Able Lending requires you to raise a portion of that loan from family, friends, and other backers. Those backers earn interest on the money they lend you. Plus, their show of faith in your business allows Able Lending to lend you more money, offer lower interest rates, and give you a longer repayment term than many other alternative loan providers.
The table below shows an overview of the general loan terms and qualifications for a consolidation loan from Able Lending.
Able Lending Small Business Loan Consolidation at a Glance
|Time in Business||1+ Years|
|Payback Time Period||1 - 5 Years|
|Loan Amounts||$25,000 - $1,000,000|
|APR||Average is 16%|
|Time For Approval||Prequalify in minutes, approved in 5 days|
|Time to Receive Funds||Within 1 week of of your backer’s funds being raised|
Below, we’ll take a closer look at the qualifications, terms, and application process for Able Lending’s term loans.
Able Lending Consolidation Loan Qualifications
The minimum requirements to refinance your small business loans with Able Lending are:
- 600+ credit score
- Business revenues of $100,000+
- Been in business for at least 1 year
These minimum requirements are lower than many of their competitors. Able Lending is able to open up their affordable consolidation loans to such a wide group of small business owners because of their backer requirement. Able Lending typically requires you to raise 10% of your loan from family, friends, and supporters. Those backers get paid interest on the money they lend you, but you get to pick the interest rate they earn, which can be as low as 2%.
Able Lending takes care of all the paperwork and processing which makes this very easy for both you and your backers. This is such a great way to save money that many people raise more than the required minimum. The average raised from backers is 15-20%.
Able Lending Consolidation Loan Costs
You can qualify for a refinancing loan between $25K – $1MM. Rates start at 8%, but the the average APR for Able Lending customers is 16%. This includes an origination fee of 5%. Able Lending has a debt refinance calculator on their website that can help determine what your savings might be if you refinance your existing business debt.
Able Lending Business Debt Relief Loan Application Process
You can pre qualify for an Able Lending refinance loan in minutes through an online application and be fully approved in 5 days. Funding typically happens 1 week after you’ve raised the required portion of your loan from backers.
Here is a list of the documentation generally required by an Able Lending small business refinance loan:
- 1 Year Statement of Cash Flow
- 6 Months of Bank Statements
- 2 Years of Income Statements
- Most Current Balance Sheet
- A Personal Credit Check
After submitting your paperwork, Able Lending will underwrite your loan. You will be given your maximum loan amount and the required minimum you must raise from your backers. Shortly after that portion of your loan is raised from backers, your loan is funded. .
How Able Lending’s Backer System Works
Able Lending requires you to raise part of the consolidation loan from 2 or more backers that want to support your business. Raising part of the loan from friends, family, and supporters allows Able Lending to give you a larger, more affordable loan than their competitors. In addition, the back portion of your loan can have an interest rate as low as 2%.
The backers can be friends, family, advisors, customers, or others who you feel would be interested in supporting your business. Any money from you, your business, your spouse, or your children will not count towards the minimum requirement amount of 10%+ of the total loan.
The money you raise is not a hand out. It is a unique way for your backer to support your business while earning a little interest. Plus, Able Lending makes your loan offering look very professional. They will give you a link to your unique loan offering that you can share with potential backers. Able Lending’s platform makes funding your loan as easy as online shopping.
When your backer’s visit your loan offering, they will see a summary page like this:
Beneath the summary is a place for your backers to choose how much they want to pledge. It looks like this:
You have the right to negotiate what interest rates you will pay to each of your backers. These rates can be different for each backer, but they must be between 2% and the rate Able Lending is charging for their portion of the loan.
Able Lending facilitates the entire process and it takes place entirely online. When the loan is fully funded you pay Able Lending directly and they take care of making sure your backers get paid for the interest & principal. It is all automated for you, which means you can spend less time trying to organize paperwork and more time getting your business back on track.
Benefits of an Able Lending Debt Consolidation Loan
Choosing Able Lending to refinance your small business debt generally gives you 4 distinct benefits.
- Saves You Money: Able Lending’s average APR is 16%
- Spread Out Loan Payments: You can spread out your current debt over a longer period of time (up to 5 years).
- Less Frequent Payments: Able Lending has a monthly payment (not daily or weekly).
- Borrow More: Get additional working capital to prevent needing to take out additional high interest debt later on.
If you need small business debt relief quickly, a consolidation loan from Able Lending might be your best option. You can prequalify for up to $1,000,000 in just a few minutes.
4. Debt Relief with a Debt Management Plan
Nonprofit credit counseling agencies can help you create a debt management plan. These plans should only be considered if you have exhausted the options above.
Debt management plans aim to consolidate all of your unsecured business debt, such as credit cards, into a single monthly payment. The credit counseling agency will reach out to all of your creditors and ask for concessions on the interest rates. Once agreements are made you will pay the agency directly and they will distribute the payments to your creditors.
Here are some negative ways a debt management plan can impact your business:
- It can typically take 3-5 years to repay your debts.
- Your credit accounts will usually be closed.
- Your enrollment into a debt management plan will show up on your credit report, and it could negatively impact your score.
- You may struggle to receive additional borrowing in the future.
One benefit to this option is you can outsource the effort of dealing with creditors. You may want someone else to handle this for you for the simple reason of freeing you up to focus on growing your business.
5. Hire a 3rd Party to Settle Your Debts
Debt settlement is a reduction in the principal you owe your lenders, but it will have a negative impact on your credit. This should be the last move you consider before filing bankruptcy. These 3rd parties are typically professionals that generally earn a percentage of the amount they save you.
While you won’t lose your assets (beyond those pledged as collateral) if your creditors agree to take less money for your debts, you will be hurt by it. A settlement is typically done to lower the total amount of the debt you owe, but it damages your credit. It will show up on your credit report as a default. This is not a decision that should be taken lightly.
While there are many non-attorney businesses that offer these services, we recommend working with an experienced attorney. They are the most qualified individuals to help your business navigate the settlement negotiations and to make sure all of the paperwork is handled properly so that your debts are fully settled with no future obligations.
6. Last Resort for Small Business Debt Relief: Seek Bankruptcy Protection
If making payments through a debt management program or negotiated settlement is not an option, you may need to consider filing a business bankruptcy. At that point, a business bankruptcy may provide you with additional legal protection.
Filing a business bankruptcy can seriously impact both your business and you personally. Make sure you find an attorney who is very experienced in business bankruptcies. This will give your business the best representation through the entire process.
If you plan to continue operating your business then you should not fall behind on your current debt payments. There are many options available to you as you seek small business debt relief, such as negotiating with your creditors or improving your budget. The best option is likely going to be a consolidation loan.
Able Lending offers a debt refinancing loan that you can apply for in minutes. You can be approved in a few days and get access to as much as $1,000,000. They have a unique backer system that helps you raise capital to combine with the capital they loan you. This saves you money by lowering your debt payments, and Able Lending handles all of the administrative work for you. All you have to do is pay one monthly payment and they take care of the rest, which lets you focus on your business.