Small businesses struggling with short term debt and high interest rates can significantly reduce their monthly payments by consolidating. Our small business debt consolidation calculator helps businesses estimate how much they could potentially save with a consolidation loan. The calculator will show your potential savings through our recommended consolidation option, a 10 year SBA loan.
An SBA loan is typically the best option to consolidate expensive short-term debt, because it offers low interest rates and long repayment terms. Our recommended SBA loan provider is SmartBiz, who can get you funded for up to $350K in as fast as 30 days. They can prequalify you through an online application within a few minutes.
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 your total consolidation loan size and potential monthly payment.
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. This is why the calculator only calculates 10 year term loans. SBA loans, offering repayment terms up to 10 years, are typically the most popular consolidation option for all forms of business debt.
Small Business Debt Consolidation
Small business debt generally should be consolidated whenever you can qualify for a more affordable loan than the combined debt you currently service. Consolidating business debt can help you save money, and it can help you save time managing the debt. Consolidation loans typically help you cut many debt providers and payments down to one.
The 3 types of small business debts that are commonly consolidated are:
1. Short Term Business Loans & Lines of Credit
Short term loans and business lines of credit typically require expensive payments due to their high APR. They often require borrowers to make weekly or even daily payments on what is owed. Most short term loans are designed to be paid off within one year.
2. Merchant Cash Advances
A merchant cash advance is a loan secured by a fixed percentage of your daily credit card and debit card receipts. That percentage is paid to the MCA company every day until the loan is repaid, with a maximum repayment period of two years. MCA’s are generally used as a last resort financing option.
3. Small Business Credit Cards
Business credit cards can be a good source of initial financing. In fact, we recommend getting business credit cards to use as a small line of credit for consistent cash flow gaps or to have on hand for unexpected expenses. Many have a 0% introductory period that you can use for free financing, as long as you pay back your balance during that period.
However, some borrowers aren’t able to pay back their balances in time. This is where these credit cards can become expensive with APR between 12 – 29%. Having more than one card with a significant balance can make this financing option burdensome to your business.
Common Consolidation Loans
A small business consolidation loan can lower your monthly payments and free up additional cash flow for your business to use elsewhere. It typically does this by combining 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.
There are typically 2 types of small business consolidation loans:
1. SBA Loans
An SBA loan is guaranteed by the Small Business Administration, making it easier to qualify for long repayment terms and lower interest rates than other loans. These loans are going to be difficult to qualify for, and they can take a lot of time to get funded (45-120+ days). They’re typically worth it because of the cost savings to your business.
2. Term Loans
General term loans are offered by both traditional banks and alternative lenders. If you’re a prime borrower, traditional banks will typically offer repayment terms up to 5 years with competitive rates to the SBA loan. However these are more difficult to qualify for and can take just as long to get as an SBA loan. Alternative term loans are more expensive, with shorter repayment terms.
Qualifying for a Business 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 Loans vs Term Loans
|SBA Loan||Term Loans|
|Business Revenue||$120K+ and trending up||$75K+|
|Time in Business||2+ Years||1+ Years|
|Payback Time Period||10 Years||1 - 5 Years|
|Loan Amounts||$30K - $5M||$5K - $300K|
|APR||6% - 9.5%||9.77% - 35.71%|
|Origination Fee||0 - 4% |
SBA Guarantee Fee of
3 - 3.5%
on loans above $150K
|Time For Approval||As quick as 1 week||Prequalify in minutes, |
approved within 1 week
|Time to Receive Funds||Typically 30 Days||30 Days|
|Visit SmartBiz||Visit LendingClub|
An SBA loan typically offers the lowest monthly payments through their low interest rates and long repayment terms of up to 10 years. However, you may endure a lengthy process to obtain one due to the large amount of paperwork involved. That’s why it’s important to have a partner, like SmartBiz, who can streamline this process and get you funded faster.
How to Consolidate Small Business Debt
Debt relief can be very beneficial to your business, but there are a lot of moving parts. The more loans you’re consolidating, the more complicated it can be. You will need to make sure you have accurate data from each of your current lenders, and there will be a substantial amount of paperwork to collect.
Breaking down the consolidation process can make it much more simple. You can learn more by reading our 3 steps to refinancing business debt, which starts with preparing by collecting all the right documentation.
SBA Loan Consolidation Required Documentation
SBA loans generally require more documentation than other term loans. Due to the length of time it can take to get funded for an SBA loan, you don’t want to slow down the process by not being prepared. Accumulating all of the right documentation up front can speed up the process, and prevent delays from occurring.
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)
- Business Tax returns (past two years)
- Personal Tax Returns (past two years.
- All Business Licenses
- Business Overview and History
- All Business Leases
- Business Ownership Information
- Loan Application History
- Resumes of Owners
The SBA loan application process also requires you to fill out various SBA forms, depending on your personal or business situation. We have also not included any additional documents needed for your specific financial situation (like if you own rental properties or other businesses).
If this sounds time consuming to you, then we recommend partnering with SmartBiz to process your SBA loan. They will handle most of the administrative headache for you and can get you funded for up to $350K within 30 days.
Monthly Payments vs Total Cost of Capital
It’s important to understand how much any financing is going to cost you now, but it’s also important to know how much it will cost you through the length of your repayment term. 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.
SBA loans are much more affordable per month than other term loans, but depending on what your goals are you may want to make sure that the total cost of capital is also affordable.
In the table below we show you one example of how an SBA loan could be slightly more expensive if you take the full repayment term to pay off each loan, but that it’s also significantly more affordable every month.
Business Debt Consolidation Total Cost of Capital Example
|SBA Loans||Term Loans|
|Origination Costs||$1,000 (1%)||$5,000 (5%)|
|Repayment Term||10 Years||3 Years (1-5 Years)|
|Total Cost of Capital||$139,200||$132,876|
An SBA loan could potentially cost you more in the end if it has a substantially longer repayment term, but the monthly payments are going to be much more affordable. This typically achieves the goal of debt consolidation loans, which is to free up more cash flow every month.
If your business currently has high interest debt with short repayment terms and weekly/daily repayment periods, consider consolidating your debt. A small business consolidation loan gives you just a single monthly payment to worry about, and will likely require much lower monthly payments.
An SBA loan will generally give small business owners the lowest monthly payments, and should be considered whenever consolidating business debt. SmartBiz can fund debt consolidation up to $350K if you’ve been in business for 2+ years, have a credit score of at least 680, and are profitable. Prequalify online within a few minutes, and you could get funded in as fast as 30 days.