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Key takeaways
- A business debt consolidation loan combines separate small business debts into one larger loan with one payment.
- Top-rated lenders offer financing for small-business debt consolidation.
- A business debt consolidation loan might save you money on costs or make payments more manageable, depending on the situation.
Running a business requires money, and sometimes you need to borrow for the necessary capital. Over time, having multiple small business credit cards and other loans can feel unmanageable.
A business debt consolidation loan can help you streamline your obligations by combining them into one new loan with a single payment. Depending on the terms of the loan, you might end up with a lower overall monthly payment that better fits your budget.
Compare business debt consolidation loans
Bank of America
7% APR$100,000Term, line of credit, secured and SBA
Chase
Not disclosed$500,000Term, line of credit, equipment, SBA
SBG Funding
1.75% per month$1 millionTerm, line of credit, revenue-based, equipment, SBA
Rapid Finance
1.08 factor rate$1 millionTerm, line of credit, revenue-based financing
iBusiness Funding
7.49% APR$500,000Term, SBA, USDA
More details on the business debt consolidation loans
Business debt consolidation loans are generally issued in large amounts and might have repayment periods of two to five years or longer. Some of Buy Side's top-rated lenders offer loans that can be used for business debt consolidation and have repayment terms of at least four years.
Best traditional bank: Bank of America
Bank of America offers up to $100,000 in small business funding for newer businesses that might have smaller debts to consolidate. Low time in business and annual revenue requirements make it an attractive choice for owners who want five years to repay their debts.
Bank of America
Max. Funding Amount
$100,000
Available Loan Types
Term, line of credit, secured and SBA
Bank of America is a traditional bank that offers term loans and lines of credit of up to $100,000 with repayment terms as long as five years. Secured loans, including equipment loans, are also available and Bank of America participates in SBA loan programs that can provide you with access to government-backed funding that might cost less than other loans.
The time in business requirement with Bank of America is six months for a secured line of credit, which can be attractive to newer business owners. Unsecured products have more restrictive criteria. However, the minimum personal credit score to qualify is 700, making it challenging for some borrowers to qualify.
Best for existing relationships: Chase
Chase offers special financing rates and other perks for existing customers. Borrow up to $500,000, and potentially more, through Chase’s Small Business Administration (SBA) loan program. Regular term loans have repayment periods of up to five years, while the SBA program allows debt consolidation term loans of up to 25 years.
Chase
Interest Rate
Not disclosed
Max. Funding Amount
$500,000
Available Loan Types
Term, line of credit, equipment, SBA
Chase is an established traditional bank with branches throughout the country. It’s possible to work with someone in person as well as apply for a business loan online. If you already have a business banking relationship with Chase you might be able to get a better deal. Additionally, Chase is an SBA preferred lender.
Like other traditional banks, though, Chase has relatively strict business loan requirements, including a 24-month time-in-business requirement. The website isn’t transparent about some of the costs associated with the loan and it can take up to two weeks or longer to fund your loan.
Best for large amounts: SBG Funding
Borrow up to $5 million for four years to be used for various purposes, including business debt consolidation. Business owners with credit scores as low as 600 might be eligible for loans from SBG Funding.
SBG Funding
Interest Rate
1.75% per month
Max. Funding Amount
$1 million
Available Loan Types
Term, line of credit, revenue-based, equipment, SBA
SBG Funding is an online business lender specializing in fast turnaround for a variety of financing options, including term loans, lines of credit and revenue-based financing. The company has overall good ratings on Trustpilot and approves funding for business owners with credit scores as low as 600. In some cases, those with scores below 600 might qualify for funding.
SBG Funding lists a monthly interest rate, which can make it difficult to compare costs across lenders. Additionally, the high annual revenue requirement might make it challenging for newer businesses to qualify, even though the time in business requirement is six months.
Best for fast funding: Rapid Finance
Rapid Finance offers approval and funding within one business day for qualified borrowers. With amounts up to $1 million available and repayment terms of up to five years, Rapid Finance can be an attractive choice for business debt consolidation.
Rapid Finance
Interest Rate
1.08 factor rate
Max. Funding Amount
$1 million
Available Loan Types
Term, line of credit, revenue-based financing
Rapid Finance offers one of the lowest factor rates—1.08—compared to other online business loan lenders. You can also access funding of up to $1 million for a variety of purposes. In addition to offering short-term loans, lines of credit and revenue-based financing, Rapid Finance provides SBA loan access, which might have a lower interest rate compared to a short-term factor rate.
Like some of its competitors, it can be difficult to find information about loan rates and terms on the Rapid Finance website. However, Rapid Finance has an online application that's relatively easy to fill out, and you can speak with a specialist to help you navigate terms and fees if you call during the customer service hours.
Best for government programs: iBusiness Funding
IBusiness Funding offers access to SBA and U.S. Department of Agriculture loan programs. Many of the loans available through iBusiness Funding can be used to consolidate business debt and come with repayment terms of up to 25 years.
iBusiness Funding
Max. Funding Amount
$500,000
Available Loan Types
Term, SBA, USDA
iBusiness Funding offers term loans of up to $500,000 with repayment terms as long as five years. This lender also participates in SBA and USDA loan programs that can provide you with access to government-backed funding that might cost less than other loans, especially loans that use a factor rate instead of an interest rate. Business term loans can be funded in as little as one day, while government-backed loans might take several weeks.
The website isn't particularly transparent about fees and rates, and there are no customer service hours listed, although there is a phone number and form you can submit for help.
How Buy Side rates business loans for debt consolidation
We evaluated more than 34 small-business lenders, focusing on key areas such as affordability, loan options, underwriting requirements, transparency and customer experience. Advertisers and partners don’t influence our methodology or ratings, as our research and editorial team maintains independence in using data-driven processes. We assessed each lender based on characteristics business owners might find appealing, such as offering traditional business loan products, discounts, application guidance, bad-credit options and solutions for short-term funding needs. We focused on lenders with at least $1 billion funded that have been in business for five years or more. We also verified that the traditional and online lenders offer loans in most states. Buy Side’s best business loans for debt consolidation are from our top-rated lenders that offer loans that can be used for business debt consolidation and have repayment terms of at least four years. Learn more about how Buy Side rates the best small-business loans using data-driven methodologies.
We weighted five factors to come up with our business loan ratings:
Cost: 30%
The cost of borrowing reduces profits, so we prioritized rates and fees. Business financing options can be difficult to compare because not all providers use an annual percentage rate (APR). Some use a simple interest rate, or a lender might charge based on a 12-week rate instead of an annual rate. Other providers charge a factor rate, which is a multiplier used to determine the total amount repaid.
Lenders that offer lower base rates received more points, as did providers with no origination fees or prepayment penalties.
Loan options: 28%
Business owners often need flexibility in their financing. Lenders that provide various loan types, repayment options and amounts scored more points than those with more limited choices. We reviewed whether lenders provide revenue-based and equipment financing options in addition to term loans and lines of credit.
Lenders offering higher amounts, longer terms and payment frequency options also received more points than those with more limited offerings. Financing providers were awarded extra points for a fast process resulting in funding within 24 hours.
Underwriting requirements: 20%
Small businesses, especially newer companies, often struggle with demanding lender criteria. We awarded more points to lenders with accessible requirements. Financing providers making it easier for companies that have existed for six months or less to get funding received more points. Likewise, lenders with lower annual revenue requirements received more points.
Our team also evaluated lenders for bad-credit options and personal guarantee requirements. Providers that accept business owners with lower credit scores received more points. We also assigned higher point values to lenders that don’t require a personal guarantee.
Transparency and disclosures: 13%
Business owners like being able to understand terms and conditions and get an idea of cost before choosing a lender. We reviewed lender websites to rate the visibility of important information. We also considered whether finding disclosure information on a provider’s website is relatively easy.
Because prequalification can provide helpful information to borrowers, we awarded more points to lenders that use a soft credit pull to provide credit estimates.
Customer experience: 9%
Applying for financing can feel burdensome, so we evaluated how providers streamline the process and make it easier for business borrowers. We considered whether lenders offer a simple online application and the availability of specialists to help business owners. Lenders that offer multiple customer service contact options received more points.
Buy Side team members also looked at reviews from trusted online sites such as Trustpilot. Business financing providers with higher customer satisfaction reviews were awarded more points.
What is a business debt consolidation loan?
Business debt consolidation allows you to combine several payments into one. You don’t always need to get a loan for debt consolidation; in some cases, you can work with a credit counselor to consolidate your debts so you make only one payment.
A debt consolidation loan is a type of consolidation that involves getting a bigger loan to pay off your smaller debts. Those debts are paid off, and your new loan and payment remain.
Business debt consolidation vs. debt refinancing
Refinancing replaces a debt with a new loan. Not all refinancing is consolidation, however. You can refinance a single loan, while a debt consolidation loan involves refinancing several loans at once.
Types of debt consolidation loans for business
When you decide to consolidate business debt, consider the following loan types:
- Unsecured term loan: Receive a lump sum and use it to pay off your smaller debts. Depending on the lender, you might have two to five years (or longer) to pay off the debt. You don’t need collateral to qualify for an unsecured term loan.
- Secured term loan: Providing collateral for a secured business loan might increase your chances of approval.
- SBA loan: One of the uses for an SBA 7(a) loan is to consolidate or refinance business debt. SBA loans often have lower interest rates and terms of up to 10 years.
Pros and cons of debt consolidation
Pros
- Streamline payments
- Can improve your credit score
- Can get out of debt faster
Cons
- Potential higher long-term cost
- Might not solve underlying issues
- Risk of collateral
Pros explained
- Streamline payments: Making multiple payments can feel overwhelming. Business debt consolidation brings everything under one loan and one payment, which can be easier to manage. The monthly payment might be lower and improve your business cash flow.
- Can improve your credit score: When a business lender reports to credit bureaus, making on-time payments can improve your business score. Some business debts (such as business credit cards) are reported to personal credit bureaus. Consolidating business credit cards could boost your credit score by improving your credit utilization.
- Can get out of debt faster: Depending on your situation, you might be able to get out of debt faster with a short-term loan that is more manageable.
Cons explained
- Potential higher long-term cost: Even if you end up with a lower rate, you could see a higher long-term cost. A lower monthly payment might result in a more manageable budget, but if you’re in debt longer, it could mean higher costs.
- Might not solve underlying issues: Consolidating business debt doesn’t solve potential cash-flow issues related to revenue and spending. Consider the realities of your business while tackling your debt.
- Risk of collateral: You might need to secure your business debt consolidation loan with equipment or property. Missing payments could result in the loss of the collateral provided.
6 steps to consolidating business debt
Getting a small-business debt consolidation loan works similarly to applying for other loans.
1. Determine how much debt you have
Add up your business debt. Include business credit cards and other business loans you have. Understand how much you need to borrow to pay off all your smaller debts.
2. Make sure you meet qualifications
Double-check the requirements for the type of loan you plan to apply for. Some lenders require minimums for time in business and annual revenue. You might also need to meet personal and business credit criteria.
3. Compile required documentation
Gather documents that prove your identity and show your financial and business situation. You might need to provide bank statements, tax returns, articles of organization and other documents as requested by the lender.
4. Review and compare lenders
Get quotes from three to find lenders. Many online business lenders offer prequalification with a soft credit check. Determine which lender offers the best deal and is most likely to help you reach your financial business goals.
5. Complete your application
Fill out the application for your first-choice lender and upload the required documents. Double-check that all the information is accurate. Some lenders can provide approval within minutes. You’re more likely to get a faster decision when all the information is documented.
6. Review your loan agreement and sign
Once you receive approval, review your loan agreement. Verify that the terms and conditions are what you expect. Sign the agreement and confirm where the money will be sent. Once you receive the funds, pay off your other debts with the proceeds of the loan and begin making payments to the new lender.
Tips for comparing debt consolidation loans
As you compare business debt consolidation loans, pay attention to the following factors:
- Cost: Understand how much your loan will cost. Some types of debt consolidation loans might quote you a factor rate instead of an interest rate. Pay attention to how much the loan is expected to cost overall as you make your decision. Check for origination, administration and prepayment fees as well.
- Repayment terms: Many online business lenders offer short-term business loans and lines of credit that must be repaid within two years. If you need a longer loan term, continue comparing business loans from traditional banks and credit unions.
- Funding time: How quickly you can get your money matters if you’re in a crunch. Fast funding for business loans often results in higher costs. If you can wait a little longer, trying to qualify for an SBA loan might make sense.
- Daily, weekly or monthly payments: Payment frequency can impact your business cash flow. For business debt consolidation, consider whether a monthly or weekly payment would better meet your needs.
Meet the writer
Miranda Marquit is a staff senior personal finance editor for Buy Side.
FAQ
What is the preferred financial profile for a debt consolidation applicant?
While there isn’t a set profile and you can get a debt consolidation loan with a lower credit score, you’re more likely to qualify for the best terms if you have a good credit score, a history of on-time payments and sufficient income to handle your payments.
Does a business debt consolidation hurt your credit score?
If the lender uses a hard credit pull to approve your loan, it might ding your score. Additionally, a newer loan can temporarily lower your score.
Can I use an SBA loan for business debt consolidation?
Yes, certain SBA loan programs, including the SBA 7(a) loan, allow business debt consolidation.
Is business debt consolidation a good idea?
Business debt consolidation can be a good option if it helps you improve your cash flow and meet your financial goals.
What are the disadvantages of business debt consolidation?
Business debt consolidation doesn’t automatically solve underlying problems with cash flow. Additionally, if you secure your loan with a piece of business equipment, you run the risk of losing it if you can’t make payments.
