A startup venture is something to be proud of- a result of several brave decisions to bring an idea to life, each decision more difficult than the last. Most aspiring entrepreneurs begin with a shoestring budget and only find things becoming more difficult as they get further down the rabbit hole. The startup journey is full of financial ups and downs that established businesses can navigate with much more ease. This is why a number of businesses that look promising initially and do not leave anything wanting in terms of effort put in, still end up failing to achieve their targets.
According to the huffingtonpost.com, “Emerging ventures without a proven product demonstrated sales patterns, and limited overall market share is high risk at best. Venture capitalists may seem willing to spend money, but they are not likely to take on unproven companies. In fact, they accept and finance only 1 or 2 out of every 100 pitches they see. According to the Small Business Administration, out of the 600,000 new businesses launched annually, only about 300 are funded by VCs. That means 99.95% of startup founders will not receive funds.”
Securing credit is, therefore, very difficult; typically startups have several creditors which means they have to make several payments at short intervals. To meet each of these they have to count on stability they have not yet been able to establish, which is a recipe for disaster and the reason why 25% of startups fail due to lack of funding.
Negotiations and bargains with creditors are never enough to manage or mitigate debt because they rarely improve interest rates and could end up damaging your credit score as well. In such a situation, the best direct route to solvency is a debt consolidation loan.
What Debt Consolidation Is
Debt consolidation is the process by which several debts are paid off by taking out a single low-interest loan. They “consolidate” or combine multiple lines of credit and rearrange them into a single monthly payment which is significantly more convenient. While it sounds like a one-size-fits-all solution to overwhelming debt, there are several things you must consider before opting to consolidate your loans.
- You must remember that even after consolidation, the onus of repayment lies firmly with you. Your debt is not repaid but simply restructured to facilitate and expedite the repayment.
- You must also acknowledge that your inability to make loan payments on time could mean you are losing control of your startup’s fiscal situation. This calls for deep introspection into your income and expenditure to see where corners can be cut and some savings can be made because your lifestyle is not the only thing you stand to lose if you do not mend your ways.
- Since the primary goal is to be debt-free, you must refrain from seeking any new loans until you have completely repaid this one. The last thing you need is another open line of credit; the debt trap is not an easy rabbit hole to get out of. Do your best to stabilize your income and expenses and ensure you can stay afloat.
Types of Consolidation Loans
Like all other loans, consolidation loans can be secured or unsecured. Secured loans give you a lower interest rate with the caveat that you have to lay down a significantly valuable asset as collateral that can be seized if you default on the loan. You could end up losing your house, car or other property if your business goes bankrupt. Unsecured loans have no such hassles but a markedly higher rate of interest. If your financial situation is relatively stable then the second option is clearly the best, but if you are in serious trouble then a secured loan is probably the best way to go as long as you have a plan to keep meeting the due dates and some decent luck along the line. You may get in touch with reputed sites such as Nationaldebtreliefprograms.com for perfect debt solutions.
How to Go About Finding a Consolidation Agency
Having made the decision to opt for debt consolidation, you can start looking for debt consolidation service providers and come up with a shortlist of suitable candidates worth approaching. Leave no stone unturned; speak to family, friends, and fellow entrepreneurs to see if they have recommendations. Make all the calls and emails you need, because this is a crucial milestone in your journey and one that demands you take the time to make the right decision. Schedule appointments and consultations, take your finance experts to meet with theirs and talk specifics, sift through the fine print and understand if they are good agencies to work with. A good company must be flexible and accommodating and also willing to go the extra mile to look after their clients. It is crucial that you work with a company that has dealt with startups before, one that knows the ropes and the issues you have faced and might face along the way. Refine the shortlist until you have one candidate you are absolutely sure is the right choice. This will be the agency that contacts each of your creditors and attempts to ensure the best possible restructuring of your debts. If everything goes as planned, you will not have to juggle regular calls from your creditors ever again.
Research, Research, Research
Research and planning are never overrated, and you must be extremely thorough every step of the way, from finding an agency to partner with to build a repayment plan and an annual budget that lets you stay solvent. Reach out to anyone you know who might have been in a similar situation before or anyone who could provide valuable insight into things that may not be evident at the outset but could come up down the line. If you do not have financial experts on-board at your startup, go out, spend some extra money and hire a debt counselor or a general financial advisor who will have your best interests in mind and provide a frank but thorough analysis of any terms the consolidation agency might bring up.
Part of running a business is the ability to run into unforeseen circumstances but rise above them and stay afloat. You do not have to feel bad about being in dire straits, but you must certainly have the mental fortitude to know when to pull out and resort to a solution like debt consolidation, and also to introspect, correct your course and maintain strict discipline during the repayment period. If all things go to plan, perhaps even with a few minor blips along the way, you will have your business back, good as new, debt-free and living to fight another day.
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.