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Consolidating business advances: when it helps and when it doesn't

If several daily payments are draining your account, consolidation can bring relief. It can also cost more. Here's how to tell the difference.

It's common for a growing business to end up with more than one advance or short-term loan. Each made sense at the time. Together, they can mean several payments leaving your account every day, leaving little room to run the business.

What consolidation does

A consolidation replaces some or all of your existing positions with a single new structure. Usually the goal is a lower daily or weekly payment, so more of your revenue stays in the business.

When it helps

• Payments are taking a large share of your deposits and you're struggling to keep a balance.
• Revenue is steady or growing. The business is healthy, but the payment schedule isn't.
• You want one funder and one payment instead of juggling several.

When it might not

• One of your positions is almost paid off. Paying it off early through a new structure may not save you anything.
• The lower payment comes from a much longer term, raising your total cost more than the relief is worth.
• The underlying problem is falling revenue. Restructuring buys time, but it doesn't fix sales.

What you'll need

• Your last four months of business bank statements
• A list of each current position: funder, approximate balance, and payment amount and frequency
• Any recent payoff letters you've received

Get an honest review

A good specialist will tell you when consolidation isn't the right move. If your file is close to clearing on its own, waiting may be the better call.

This article is general information, not financial, legal or tax advice. Talk to a qualified professional about your situation.