For the financially savvy small-business owner looking to free up some extra cash, consider refinancing or consolidating loans with high interest rates.
Nearly a quarter of businesses that applied for funding during the second half of 2016 sought to refinance existing debt, according to the Federal Reserve’s Small Business Credit Survey released in 2017.
Refinancing or consolidating could lower your monthly payments and help you grow your business, but before you get started, you need to understand the difference between the two financing strategies.
- Debt consolidation combines several loans or merchant cash advances into one loan, which could result in lower payments
- Debt refinancing means you take out a lower-interest loan and use it to pay off the original to save money
Besides banks, you can turn to online alternative lenders for business debt consolidation and refinancing. Here are our top four recommendations, ranked by cost of financing.
Business debt consolidation loans: Compare options
|Best for||The lowest rates|
|Businesses with low revenue|
|Businesses that are at least 1 year old|
|Businesses with a strong network of friends and family
|Loan amount||$30,000 - $350,000||$25,000 - $500,000||$10,000 - $350,000||$25,000 to $1 million|
|APR||8.5% - 9.21%||7.4% - 36%||10% - 25%||8% - 25%|
|Personal credit score||620||650||600|
|Time in business||2 years||2 years||1 year||1 year|
1. SmartBiz: For the lowest rates
When combining your business debt into one bundle, you want the lowest possible annual percentage rates. That makes SmartBiz your most attractive option. The online platform connects business owners with loans backed by the Small Business Administration, which have the most competitive rates on the market.
Pros: Low rates on SBA loans
Cons: Requires strong personal credit and business performance; tedious, paperwork-intensive application process
- Loan amount: $30,000 to $350,000
- APR: 8.5% to 9.21%
- Loan term: 10 years
- Funding time: As quickly as seven days but typically several weeks
- Read our SmartBiz review
2. Funding Circle: For businesses with low revenue
Established businesses looking for competitive APRs and fast cash might want to check out Funding Circle. Its application process takes about 10 days but is still faster than at SmartBiz, making it a solid option for healthy businesses looking for quick financing.
Pros: Low APRs for borrowers with good credit; flexible term lengths; no minimum revenue required
Cons: Young businesses and borrowers with poor personal credit won’t qualify
- Loan amount: $25,000 to $500,000
- APR: 7.4% to 36%
- Loan term: One to five years
- Funding time: Average of 10 days
- Read our Funding Circle review
3. Credibility Capital: For businesses that are at least 1 year old
Credibility Capital offers short-term financing — one, two or three years — to companies with good credit, making it a valid option for businesses looking to refinance expensive debt. Three years is the shortest maximum repayment period among the lenders in our list.
Pros: Competitive APRs; no prepayment penalty; need at least 650 personal credit score to qualify
Cons: Not for long-term financing
- Loan amount: $10,000 to $350,000
- APR: 10% to 25%
- Loan term: One, two or three years
- Funding time: Seven days on average
- Read our Credibility Capital review
4. Able Lending: For businesses with a strong network
Able offers business loans of up to $1 million that can be partly subsidized by your friends and family, making it a good choice if you’ve rounded up a loyal customer base. Under the Able Growth loan model, Able picks up the rest of the financing after your backers’ contributions. Able also offers a conventional loan it originates 100%.
Pros: You can solicit friends and family to back part of your loan
Cons: Not for borrowers with bad credit or low revenue; funding speed dependent on how quickly backers commit funds
- Loan amount: $25,000 to $1 million
- APR: 8% to 25%
- Loan term: One to five years
- Funding time: Up to seven days for Able-funded loans; up to one to two days after full backer contribution for Able Growth loans
- Read our Able Lending review
Find and compare small-business loans
NerdWallet has created a list of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged the lenders by categories that include your revenue and how long you’ve been in business.
Updated Sept. 11, 2017.