Each year thousands of American small business owners find themselves in desperate financial straits, and many turn to debt relief for help. While there are many different options for addressing business debt, not all of them are effective. In fact, some may even be counterproductive. To make sure that you’re selecting the best option for your situation, be sure to weigh the pros and cons of each.
Traditionally, business debt relief comes in the form of a loan designed specifically for this purpose. You can obtain one through banks and credit unions, small business debt relief lending companies or online lenders. These types of loans are intended to reduce your interest rates and fees by consolidating multiple business debts into a single payment.
In addition to these debt consolidation loans, the federal government has also offered a number of different incentives and loans for businesses during the COVID-19 pandemic. These loans are meant to support businesses by improving cash flow and helping maintain employee retention across the nation. To learn more about these programs, visit the government website to read the fine print and terms of each.
The CARES Act includes $17 billion in relief to assist with the cost of doing business during the COVID-19 pandemic. This includes a business debt relief program, which will pay six months of principal, interest and associated fees that borrowers owe on 7(a) loans not made under the Paycheck Protection Program (PPP), 504 loans and microloans reported in regular servicing prior to September 27, 2020. Disaster loans are not eligible for debt relief under this program.
If you’re considering a loan to consolidate your business debt, it’s important to first determine how much you owe in total. To do this, you’ll need to gather a list of all of the existing debt obligations that your business currently has. It’s also a good idea to note the amount you owe, repayment terms and interest rate for each debt obligation.
Once you’ve compiled your list of debts, you can then compare lenders to find the best offer for your business. You’ll want to make sure that the loan has a lower interest rate than your current rates, as well as a repayment term that is manageable for your business.
Another way to reduce your business debt is through a balance transfer credit card. This type of card allows you to move your existing debts onto a new credit card, which will have a 0% introductory balance transfer APR for a certain period of time. This is only an option if you’re confident that you can pay down the debt before the introductory period expires, as you could quickly end up in more debt if you don’t.
Finally, be wary of any debt relief company that asks for upfront fees or makes unrealistic promises about eliminating your debts. You should always contact your state’s consumer protection agency to make sure that no complaints are filed against the company you’re considering.