It isn’t unusual for small business owners to incur debts in forms of loans or external capital investments. For dental practices, it’s even easier for owners to have debts due to the expensive nature of dental equipment. If you took more than one loan to finance your practice, then you’d know how several debt repayments can complicate bookkeeping and stifle cash flow. You may end up using most of your work income, paying already existing loans, and have nothing left to reinvest in your business. Several dentists are drowning in this reality.
Fortunately, there is a way you can manage multiple loans and save money – debt consolidation.
What is Debt Consolidation?
In straightforward terms, debt consolidation is combining all your loans into one loan. When you consider consolidation, you’re looking at refinancing all your previous loans – regardless of the type – into a single debt with just one repayment plan. Instead of worrying about how you’ll pay back your different loans with their different interest rates, you’ll just focus on one payment. In most cases, consolidated debts get repaid at an interest rate lower than the previous ones.
Benefits of Debt Consolidation for Your Practice
Better Cash Flow
When you have multiple repayments to make monthly, your cash flow can be affected negatively. With the lower monthly liabilities that come with consolidation, you’ll have more cash with you monthly. You can use this extra cash to offset other expenses or handle unforeseen costs without messing up your cash flow. Consult with a dental CPA San Diego on how debt consolidation can free up your cash flow.
Lower Interest Rates
Consolidating your business debt allows you to get a better – mostly lower – interest rate on your combined loans. You won’t have to worry about the different interest rates on all your multiple smaller debts. It also helps to free up money and save costs for you.
More Comfortable Payment Schedule
Much like the benefit of having a lower interest rate, consolidation combines all previous repayment schedules into one plan. Sometimes, you can default on a loan repayment day just because you have multiple loan repayment days to track. However, when your debt is consolidated, you’ll only have a single repayment schedule, reducing the stress and chances of missed repayments.
Free Up Collaterals
In most cases, lenders have to put down some form of collateral before securing a loan. Therefore, multiple loans mean multiple guarantees tied up somewhere. Consolidation eliminates all that. Since it’s now a single debt, you’ll need just one collateral – if you need any at all.
Higher Credit Ratings
The thing about having multiple debts is that it does a number on your credit score, both business and personal-wise. With all combined into one, your credit rating will definitely get a boost.
With owning a dental practice comes several business aspects to cover and the medical front to manage too. You can take your mind off one of these aspects with a professional dental CPA in San Diego, handling your finances. And if you have multiple debts to pay, consolidating them is not a bad idea. All you need is to have a dental CPA San Diego walk you through the processes and recommend the best debt consolidation firm for you.