How debt affects your business
All small and medium enterprises (SMEs) need funding to enable them to operate and grow. While some business directors are able to self-fund the running of the company, most businesses will need to seek funding from external sources for working capital or expansion. This kind of finance can take many forms including equity investment, bank overdrafts, cash from friends and family, and loans from credit providers. Many companies will end up with multiple loans from various creditors, which will have been taken at different times for different business needs.
While loans can help businesses with their cash flow and working capital requirements, they can also result in the company making multiple repayments each month at varying interest rates, and can be very expensive, damaging the business’s ability to grow. If your business is in this situation, one way to lessen the burden of these loans could be to restructure your company’s debt to make repayments more affordable and simple to keep track of.
Benefits of restructuring
Debt restructuring can have many benefits for your business, giving you the time to do what is most important – growing your company.
Consolidate existing debts
If your business is currently paying back multiple loans every month, you’ll spend a lot of time juggling the various repayments, which can be very time-consuming. Restructuring your company’s debt could help reduce the number of monthly repayments you have to keep track of by consolidating these into one payment, making your life simpler and allowing you to get back to running your business.
Plan your finances more easily
If you’re currently paying off numerous loans, which may have different interest rates and loan terms, it can be difficult to plan your company’s finances. Restructuring your company debt into a single loan allows you to make plans for your business’s future growth.
Lower interest rates
The loan repayments you’re currently making may have interest rates that are placing a financial strain on your business. Consolidating your company’s existing debts could mean that you pay a lower interest rate overall, reducing the cost of finance to your business from outstanding loans.
Free up cash in your business
The outstanding debts you’re repaying each month may be taking up a significant proportion of the cash in your business, causing a strain on your working capital availability and leaving you unable to carry out your plans to grow your business. Restructuring these debts can mean you’re making lower repayments each month, freeing up cash for running your business and enabling you to grow.
How to restructure business debt
If you decide that restructuring your outstanding debts could benefit your business, there are a number of providers that can help.
Specialist debt restructuring companies will examine the loans your business currently has and work with you to consolidate these, usually over a longer period with lower monthly repayments. Remember that these firms will charge fees for their services and there may be a contract that you are tied into.
Another option is to take out a debt restructuring loan through a peer-to-peer lending company. Peer-to-peer lending involves raising funds for your loan through a group of investors. There are different models, but in general, your loan will either be offered to investors at a fixed rate or in a loan auction where they can bid at different interest rates. You can expect to pay an arrangement fee to the peer-to-peer lender but many providers allow you to pay off the loan early with no penalties.
If you’d like to restructure your company’s debts, a loan from LendingCrowd can help. To get more information, call us on 0345 564 1600 or visit www.lendingcrowd.com/borrower