Whether you’re a new business owner having just opened your doors a year or two ago, or a veteran merchant facing financial difficulties, it can be extremely worrisome. Owning and operating a business is a constant expense. It’s even harder when there suddenly isn’t enough money coming in to spend on labor, inventory, utilities, rent or pay back any existing business loans.
Finding yourself in this situation is daunting, but you’re not alone. You do have options to help get yourself out of it. You can either consolidate your business debt or file for bankruptcy.
Business Debt Consolidation vs. Bankruptcy: Which is the Better Choice?
It’s important to note that every situation is different, so be sure to explore the two options thoroughly before making your decision.
One major advantage of consolidating business debt is that it keeps your credit score from dropping significantly. Filing for bankruptcy ruins your credit score and remains on your credit report anywhere from seven to 10 years, depending on the type of bankruptcy you filed. Having this record in your history could hinder your attempts to obtain a business loan in the near future as well as impact any other type of loan that you might seek.
Filing for bankruptcy can keep creditors from harassing you, but debt consolidation allows you to pay off your debt through one channel instead of dealing with many creditors at a time. You don’t have a long list of bills demanding immediate attention. With consolidation, you can easily keep track of your financial records and all your remaining debt.
In other words:
Remember when you used to bring lunch money to school? Well, let’s say that for a week straight you left your money at home and had to borrow from five different friends. Instead of trying to remember who gets paid what, you have the option to ask another classmate of yours to help monitor your total payments for you. This person—your debt consolidator—tells you what you owe. You give him the money, and he will redistribute it accordingly. He may even try to talk some of your friends down by appealing to their sympathy so you don’t have to pay them as much as you originally borrowed. That’s the principle of debt consolidation.
Lenders that specialize in business debt consolidation are there to help you through the process, so you’ll always have someone to turn to with any questions you may have about your debt. PowerUp Lending Group, for instance, helps countless clients every year with consolidating business debt through consulting and strategic planning. This support can also benefit you in the long run. The good financial practices you learn from your lender, you can apply as you pay off your debt, and after you’re back on track.
After you’ve thoroughly researched both choices, then decide which option would be most beneficial for your business. Every situation varies, of course. But, in general, we recommend that you consider consolidating your business debt because filing for bankruptcy can have such long-lasting effects that could impact your future.