Debt consolidation comes to your help when you are in a deep mess with your finances, and your startup has taken a back seat. Debt consolidation is a bailing out process of the debtor, and in the process, the lender also gets back its due. It is wiser to entrust your debt worries to a third-party debt consolidation company and you can concentrate on the other aspects of your startup.
There are professional agencies that are specialized in saving people from such a situation by helping you repay the debts in a better way and also save the startup from closing down. This method is termed debt consolidation.
A new business venture of one single person or a group of people to meet the market needs for certain products, services, consultation or process is the basis of a startup. A venture is that which is designed and validated to be scaled up into a business model. In many of the cases young and energetic people try out their dream of becoming an entrepreneur.
Young people have many new and innovative ideas which they want to experiment with. A startup idea might have to go from door to door to present their business proposal to different funding agencies or investors who might be interested in investing in their startup. A startup is started small due to the want of an inflow of money. Investors try to engage in a more established business, which gives a sure return for their money. Only a few might be there who can take the risk and put faith in the budding young people who want to mint their hopes and dreams.
Researches show that many of the startups die at a tender age owing mostly to the financial crisis. Sustaining the continuing financial crisis in the beginning days of the venture till the money starts rolling is a daunting affair and demand extreme emotional and physical toughness of the entrepreneur.
The startup owners arrange money from different sources. There might be very few choices, and hence money is taken from the market against a varied range of interest rates. Some of these credits become detrimental to the business in the coming days. The repayment amount rises to such a level that it takes the major focus and the main business is consequently hampered. So, immediate and serious steps must be taken to handle the debt issue.
Before we go into how the debt is to be handled, first let us look into the sources where a startup arranges the money, some might be the ones you have gone for.
Table of Contents
- The debt might be secured debt or unsecured debt.
- There are many benefits to the debt consolidation process
The debt might be secured debt or unsecured debt.
Below are some of the examples
#1 From a Bank Loan
A bank loan generally grants a loan against some mortgage or collaterals. In case you have a good credit score then a personal loan may be obtained without collaterals. The process is lengthier and requires checking references, documentation, etc.
#2 From relatives
– when there is a financial crunch or requirement you may ask your relatives, friends for a loan against a milder interest rate. In this case, trust is the only factor, and there is no checking and no hard and fast legal terms. The money can be returned flexibly.
#3 Online Lenders
The most dangerous of the lot. They offer debt consolidation loan online without any checking, documentation or without any collaterals and securities.
#4 Loan from the Federal or the State Government
The Federal Government or the state government may also offer loans at special interest rates to promote startups as per the national schemes. The rates of interest and other features of the loans vary from place to place.
#5 Investment from a Funding agency or interested investor
These people might be active or involved in a dormant manner. Due to their investment, they will interfere with the business, and this may, in turn, disturb the original concept and ideas of the startup. Now when it comes to repayment of the loans and dividends, it is a great hindrance to the operation and growth of the startup in most of the cases.
You can neither escape by not paying the instalments nor by avoiding paying your bills. Also, such a situation lands you to lose the credit score in the market.
There are various methods by which debt consolidation is structured to suit the requirement of the startup. Let us find out some of the requirements and benefits of debt consolidation. The basic requirement to go for the Alleviate debt consolidation program are given below which may vary from situation to situation.
- Your startup must at least be six months old.
- A sound credit score of > 500.
- Present a real annual turnaround.
There are many benefits to the debt consolidation process
#1 Lower payment
You have to make only one monthly payment in place of your all smaller debts. A sum is to be paid which will be distributed to all the lenders. Now you have a single loan to be repaid, and the consolidated loan has a lower rate of interest.
#2 Buy more time
The consolidated loan has an extended period of loan repayment of about 5 to 10 years. This gives your startup a new lease on life.
#3 Get more cash
The debt consolidation company also offers some loan to the startup in addition to repaying your existing debts. This helps the operation of the startup so that the investment of the debt consolidation company can be repaid easily. Apart from the above, additional precautions must be taken not to go into further debts.
Stop using your credit card since they have the highest rate of interest. Use them judiciously only at planned situations so that you accumulate a handsome credit score as well. Plan and reduce various operational expenses of your startup which will take you a long way. Try to find out the best debt consolidation company who are experienced with the needs of a startup. Try debt consolidation counseling, look for reviews and testimonials before you finalize.
Make yourself assured completely about your choice before you engage with one. Be careful, so that debt consolidation is not forced onto you. Last but not least, you need a lot of hard work to repay your loans and work still harder to stay away from debt.