Sometimes, business debt can get a bit overwhelming and you may consider debt consolidation as a solution. In this blog, we’ll take a closer look at the pros and cons associated with debt consolidation.

Pros of Debt Consolidation

There are seven advantages of debt consolidation for small business owners, including:

You can comfortably handle your monthly debt payments

When business owners struggle with paying their existing loans, they start looking for debt consolidation options. This allows them to reduce their monthly payments, which alleviates financial stress. Lower monthly payments are the primary reason that business owners seek this type of financing.

You improve your cash flow

When your debt payment is smaller, it reduces the demand on your cash flow, freeing up funds so that you can use them for other purposes. This means that you can pay your suppliers, not miss payroll, and grow your company.

You can focus on growing your company

Since cash flow is improved, you have more control of the finances of your company. You won’t have to juggle paying your suppliers, delay payroll, or postpone new projects. You can focus on growing your company and seeking out new clients.

You lower interest rates and/or extend debt terms

There are a few ways that debt consolidation can reduce your monthly payment:

Reduce interest rate
Extend terms

Either way, payments are reduced. However, extending the term could be a good thing and a bad thing.

You can structure payments to support growth in the future

When you are structuring your debt consolidation, you need to have two objectives in mind: handling your current situation and handling future needs. You should have 2 tiers: consolidation and growth. When you get the loan, it’s important to implement the growth tier because getting financing for growth after you get a consolidation loan is difficult.

Requirements are simple, almost all small businesses can get it

Debt consolidation is available for small businesses and the qualifications are simple:

At least $500,000 in financing needs
3 years of business history
Have taxes paid-up or a payment plan in place
Have real estate and/or equipment

You can manage it much easier

Typically, debt consolidation solutions have a single-payer. If there’s a growth tier attached, they may have two payers. This makes it much easier to manage than having multiple loans/payers with different payment dates.

Cons of Debt Consolidation

While it’s true that there are several good things about debt consolidation, there are also some negative things. We’ll look at those below:

It extends the term of the debt

Previously, we mentioned that extending the term of the debt could be a good thing because it reduces the monthly payment, which brings stability to your business. However, this means the total cost will be higher. You’ll have to carefully consider this to ensure that it’s best for your business.

Requires discipline to avoid the same issues in the future

If you’ve got your business into trouble by getting too many loans, you’ll want to exercise discipline to avoid the same issues in the future. All companies indeed have ups and downs, and “easy financing” can be tempting- but it may cost you. If your past problems continue repeating, you may not be able to get a new loan in the future, which could mean failure.

It won’t fix a terrible business model

Finally, while debt consolidation can fix financial mistakes, it cannot fix a bad business. If you have flaws in your business model, it will just move the problems to the future instead of addressing them.


If you’re considering debt consolidation to fix your financial issues, contact Point High Finance. We can advise you on whether or not this will be a good solution for you and the best way to start the application process.