What a business consolidation loan is, and how to apply for one

This article is for educational purposes only. JPMorgan Chase Bank N.A. does not offer a specific business debt consolidation lending product. Any information described in this article may vary by lender.

Equipment financing. Business credit cards. Vendor bills. If you’re like many business owners, you may feel like you spend much of your time paying out when you should be taking in. A business consolidation loan can help simplify the process by consolidating business debt into one payment — and may even save you money if you qualify for a lower interest rate.

What is a business consolidation loan?

A business consolidation loan, or debt administration loan, allows business owners like you to roll multiple loans or cash advances into one more manageable loan.

This isn’t a one-size-fits-all solution. But it could be a good fit, depending on your unique needs and financial situation.

What are the benefits of a business consolidation loan?

Once the consolidation process is complete, you’ll be able to streamline your payment process and make a single payment each month.

A business consolidation loan can also come with a lower interest rate, a shorter repayment period or both. There’s no guarantee that your new rate or terms will be better than your old ones, but if you do your research, you could end up paying significantly less overall. The money saved could help pay off your higher-interest-rate loans or cover other business investments and expenses.

There’s also one important caveat to consider: Some lenders charge extra fees to buyers who want to pay down their debts early. Your credit card company may also charge you to transfer your balance, and you could have to pay an origination fee on the new loan, which covers the processing of your application. Make sure that you understand any and all fees you’d be asked to pay before applying for a new business loan.

How do you apply for a business consolidation loan?

If you’ve decided that you’d like to apply for this type of business loan, gather up your financial documents and get ready to crunch some numbers.

• Find out what you owe: The first step toward paying off your debts is getting a handle on exactly how much you owe. In addition to balances, it’s important to take into account the terms, rates and fees. Having a more accurate picture will allow you to choose a repayment plan that is a better fit for your overall needs.
• Determine whether you qualify: Lenders will likely use your personal score, rather than your business credit score, to decide whether to approve you for a business consolidation loan. Some will consider working with you even if you have bad credit. In general, you’ll have better luck finding a lender if your score is good or excellent.
  
  Worried your score might be too low? There are steps you can take to try to boost your credit score in the weeks or months leading up to your loan application. Avoid applying for additional credit cards, for instance, because that will trigger a credit pull that can temporarily lower your overall score. Take a look at your credit report to make sure that it doesn’t contain any errors that might negatively affect your score.
• Consider your options: Treat this like any other major purchase, and spend some time shopping around for the best option. Banks often offer the most competitive rates and terms. But there are other valid small business financing options.
• Get your paperwork in order: Make sure that you have both personal and business bank statements and tax returns, financial statements for your business and your current debt schedule handy. You’ll be asked to provide the above documentation, and your potential lender will get in touch if they need more information during the underwriting process.

Once your application has been approved, your loan officer will send you a business loan agreement. Review it carefully, and reach out if you have any questions about the language in the contract. Then just sign on the dotted line, and you’ll be ready to pay off your existing debts and start making payments on your new loan.