Action Steps
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Learn about small business debt consolidation

Business debt consolidation is somewhat different from personal debt consolidation. There are often more assets and more legalities in the process. Learn about the process in several ways.

I recommend: Find out debt consolidation solutions available to the business. FinancialWeb offers a good overview of the options a business owner has when it comes to consolidation. Credit offers information for business owners facing the inability to pay debts, including what options are available when personal credit is being used to pay business debt.

Hire professionals to find business debt consolidation solutions

Small business debt relief is not possible if the business owner is unsure of the amount of debt the business has, who its creditors are and the current state of assets. Hiring professionals, such as accountants, to determine this can help put the business on the right track. Attorneys can also help to determine what legal options the business owner has, especially if bankruptcy becomes necessary. Contact these professionals ahead of time to determine options. Then, make the right decision.

I recommend: Consolidate business debt once all information is obtained from an accountant. Entrepreneur offers a detailed amount of information about how to hire accountants and what they can provide. Find attorneys to help give bankruptcy options and to help with potential debt settlement. FindLaw offers an extensive list of available attorneys and information regarding the process.

Determine the possibility of a debt consolidation loan

Business debt consolidation can be done through a loan. One, larger loan can be obtained to pay off smaller debts. Then, the business makes payments on the new loan. These loans are often available as secondary mortgages. If a business has good credit, it may be able to obtain an unsecured business loan.

I recommend: Search for options to consolidate debt in this manner. Business Lenders provides in-depth information on consolidation loans for businesses, specifically on Small Business Administration loans. Determine the value of the business' assets to find out if there is enough value to borrow against. Use the American Society of Appraisers to learn more about the business' value through a professional appraiser.

Helpful advice for making the most of this Guide

• •  Business debt relief is often available since lenders do not wish to lose the investments in the business. Filing for Chapter 11 bankruptcy can help the business to hold onto property and assets while working out a repayment plan with creditors. Contact a business bankruptcy attorney to learn about these options.

Guide to Debt Consolidation Options for Home and Business Owners

Develop a strategy for getting the best debt consolidation deal possible

By Eisla Sebastian, Writer/Emergency & Disaster Management Consultant, KTS Productions

Action Steps
The best contacts and resources to help you get it done

Obtain your personal and business credit reports to evaluate your debt consolidation terms

Credit reports on both your personal and business credit histories will impact what interest rates and debt consolidation programs you will qualify for today. Business debt consolidation programs may look both at your credit and your business' credit, or they may look at only one of these credit reports.

I recommend: Use the Federal annual credit report program to request your free annual credit reports from TransUnion, Equifax and Experian. Debt consolidation companies use these reports to determine your credit worthiness and risk rate. Check D&B for your business credit reports.

Request quotes from debt consolidators and debt consolidation companies

When you request a quote from a debt consolidator, you will also generally receive debt consolidation information about several debt consolidation solutions. You will need to look at interest rates, fees, loan terms and restrictions for possible uses of the funds generated.

I recommend: Access quote tools for small business debt relief and small business debt consolidation at Debt Consolidation Connection, Lending Tree, Business Capital or Commerical Debt Counseling Corp.

Determine if business debt consolidation is your best option

Business debt consolidation is not the only option you have. Changing your payment strategy for credit cards and other debt products can also impact the amount of debt you carry. Select the option that will allow you to meet your financial goals by identified deadlines.

I recommend: CNN Money's Debt Reduction Calculator and Dinkytown's Debt Consolidation Calculator.

Helpful advice for making the most of this Guide

• •  You can lower the interest rate you are quoted by monitoring your credit score and waiting until it raises enough to qualify you for a lower rate before applying for a debt consolidation loan.

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Employ attorneys who specialize in small business debt relief

Business debt relief may be possible if the debts are settled rather than consolidated. Here, an attorney should be used to determine if the debts can be settled through negotiations with the lenders. Often, these debts settle for 70% or less than the debt balance.

I recommend: Find attorneys specializing in business debt relief. FindLaw provides a range of attorneys who specialize in debt relief for small businesses. Locate one nearby to speak with about the business' options. Local law offices are the best option for most businesses, since state laws may require specific requirements. For example, in Arizona, Clark Law Offices is an option for an attorney who can provide help. This site also offers good information regarding the process.

Use debt consolidation companies to lower payment requirements

Business debt consolidation companies provide a range of services to businesses. They can often negotiate a lower interest rate on credit lines, stop late charges, reduce the amount owed and sometimes may be able to reduce the monthly payment requirements. Take full advantage of these service's ability to provide these benefits. The business owner trying this on his own would not likely get the same benefits.

I recommend: Consolidate debt only when it seems wise to do so and no other options are available. Learn as much about debt consolidation as possible prior to getting started. FinancialWeb offers an excellent look at a business' options when it comes to consolidating. BestManagementArticles is an excellent resource for learning about eligibility and benefits of consolidation.

Consolidate business debt into a loan

A debt consolidation loan is one of the best tools to maintaining the business' credit while still getting out from under. Without alerting creditors, determine if the property the business owns is high enough in value to take out a loan on the equity. The most common option is on real estate or business property, such as high priced equipment. Look for a low interest rate mortgage loan to save as much money as possible.

I recommend: Determine if business debt consolidation into a loan is possible. Get an appraised value of the property first to determine if there is enough equity to borrow against. Commercial Property Appraisers can help to determine the true value of the business and its real estate. Shop around for the lowest interest rates on these loans. Use the resources at Bankrate to determine the best loan available, including using mortgage calculators.

Helpful advice for making the most of this Guide

• •  Business debt consolidation solutions range widely. As a business owner, consider all options prior to contacting creditors. Making the most of debt consolidation means learning all options and comparing them to find the most feasible option for the company.

Action Steps
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Credit counseling

Credit counseling can take a number of different forms, but the overall goal is the same. The intention of credit counseling is to aid an individual or organization with respect to managing finances. This can include financial planning and budget management, as well as methods available for debt repayment.

I recommend: Important aspects of credit counseling and frequently asked questions on the topic are explored at BankRate.com.

Wraparound

A wraparound mortgage or loan is made up of an old loan that has been combined with a new loan. Wraparounds result in an interest rate that falls between the individual interest rates of the old and new loan.

I recommend: For more details on a wraparound mortgage or loan, visit MtgProfessor.com.

Introductory rate

An introductory rate is a low, initial interest rate. It is often associated with credit cards. When purchases are made on the credit card, the introductory rate it used for a period of time, and then the interest rate climbs to its normal percentage. Introductory rates are used to appeal to new customers.

I recommend: ClutchMagOnline.com examines the benefits and drawbacks of the introductory rate while offering a detailed explanation of the term.

Equity

Equity is most often defined as the difference in value between a piece of property's market value and the debt against it. Such debts may include mortgages, claims, liens, rights and liabilities.

I recommend: An overview of the term equity can be found at Cornell.edu.

Negative amortization

Negative amortization occurs when a situation presents itself in which partial payments are made on specific debts. Instead of lowering this debt slowly and gradually over time, it actually increases the debt gradually. Negative amortization most often takes place when payments are made only to cover interest, which is subsequently added over time to the loan's balance.

I recommend: The Washington Post offers detailed information about negative amortization.

Acceleration clause

An acceleration clause in a financial agreement would allow the lender of a loan the option to demand early payment. This demand may be for the loan outstanding balance to be paid in full. Acceleration clauses are used only for certain reasons, such as defaulting on a loan, destroying property or transferring a property's title.

I recommend: WiseGeek.com offers additional information on the specifics of an acceleration clause.