After the recent financial upheaval, when small businesses are not being able to manage their finances, and falling into debt, debt consolidation is the answer. Small business debt consolidation companies can work for small business owners by taking all their current debts and consolidating them into a single monthly payment. This helps the small businessmen managing their monthly payments and coming out of the debt as soon as possible.

However, before you consider the option of small business debt consolidation, know all its essential facts and attributes.

How does a small business debt consolidation program work for you?

When you enroll in a small business debt consolidation program, credit counselors negotiate with creditors and reduce the interest rate on each of your debt. Then they collect a fixed monthly payment from you and disburse to the creditors in order to pay down your debt. Thus, this reduces your monthly payments and makes it easier for you to pay off the debt.

Tips to consolidate small business debt:

• First and foremost, gather all the balances on your debt owed. Also gather necessary information with regards to your small business debts. After you finish this task, categorize the debts according to your priorities. This will help you in planning out how you are going to repay your debt and how much payment you will put towards each category.
• Once you have a complete idea about your debt, apply for a business debt consolidation loan or SBA loan from a traditional bank and financial institution. But ensure that the interest rate offered is lower than what you are paying currently. When you will apply for this loan, you might need to submit details of your financial information, such as properties owned, deposit accounts, ability to pay monthly installments etc. You may either avail a fixed rate loan or variable one, depending on your unique financial situation.

Advantages of small business debt consolidation:

• Using a small business debt consolidation company to take care of your financial woes is the best way to overcome your company’s debt problem. They will first evaluate your financial situation and credit report, and then will negotiate with creditors to reduce the interest rate on each of your debt. Thus, the company will do all of the work for you, and you will have to make a month payment directly to the company.
• Another great advantage of small business debt consolidation is that it will get all of the creditors and banks off your back at once. According to the FDCPA act, as soon as you enroll in a small business debt consolidation program, you will stop getting annoying phone calls from the creditors regarding the debt collection.
• With small business debt consolidation, you can make a single monthly payment to all your bills and debts. Making a single payment each month is more convenient than handling several debts with several different interest rates.

Disadvantages of small business debt consolidation:

• If you enroll in a small business debt consolidation program, the company will charge a fee that will most likely be greater than the interest rate on a loan to cover your debts. This is considered to be the greatest disadvantage of small business debt consolidation. 
• A small business debt consolidation company collects a fixed monthly payment from you and gives it away to the creditors. But unless the creditors receive their payments, they might report to the bureau “as not yet paid”, which will remain on your credit report until the creditors are paid by the company. Although for a short period of time, small business debt consolidation company can hurt your credit score.

Thus it is to be concluded by saying that in most cases, small business debt consolidation is a great idea whether you hire a company or do it yourself. However, before pursuing the option, consider all the facts and attributes discussed above.