What is business debt consolidation?
Business debt consolidation involves taking out a single new loan to pay off multiple existing business debts — leaving you with one monthly payment, one lender, and often a lower overall monthly outgoing than the combined sum of the separate debts.
What debts can be consolidated?
Business debt consolidation can typically cover a wide range of business liabilities including: multiple business loans and overdrafts, merchant cash advances (which can have very high effective rates), HMRC arrears (VAT, PAYE, corporation tax), supplier arrears and trade creditors, personal loans taken to fund the business, and credit cards used for business purposes.
Multiple merchant cash advances can be particularly damaging to cash flow — each taking a daily percentage of card revenue. Consolidating these into a single term loan can dramatically improve cash position.
Secured vs unsecured consolidation
For larger consolidation amounts, a secured loan (backed by commercial or residential property) will typically offer lower rates and a longer term — reducing the monthly payment significantly. For smaller amounts, unsecured consolidation based on trading performance may be more appropriate.
Will debt consolidation help my credit score?
Consolidating multiple debts into one can improve your credit profile over time — replacing multiple accounts (some of which may show as late or in arrears) with a single performing account. However, the immediate impact on your credit score is neutral to marginally negative in the short term.