Let’s face it, running a business is not cheap. In fact, most businesses need to take on some form of debt to fund their launch and keep the company running. Fortunately, there are a number of organizations that offer free debt advice to businesses. However, this support comes with strings attached: advisors expect something in return—usually a small percentage of your monthly repayments for an agreed period of time (usually three years). While these ‘debt advisors’ might not be able to give you free money, they can help you find loans from banks and other financial institutions at more favorable rates. But how do you know if these advisors are worth your time? Here is everything you need to know about business debt advice…
Know the difference between debt advisors and licensed lenders
There are numerous organizations that offer debt advice for businesses. However, not all of them are the same. Some are debt advisors, while others are licensed lenders. What’s the difference? Licensed lenders are authorized to make loans directly to companies, while debt advisors can only point you in the direction of lenders. This means that if you choose to work with a debt advisor, you will need to do your own research to find a lender that will fit your needs. On the other hand, if you choose to work with a licensed lender, they will attempt to find the right lender for you. They can also help negotiate terms, manage the process, and even handle the paperwork!
How do you find a business debt advisor?
If you are looking for a business debt advisor, you will likely have to do some digging. Debt advisors are not required to register with any governing body, so there is no central database you can use to find them. Instead, you will need to use good, old-fashioned research techniques to find the right debt advisor for your business. Start by searching for “business debt advice” or “business debt assistance” in your area. You can also ask for recommendations from other business owners in your network.
Are business debt advisors worth your time?
Debt advisors are certainly not for everyone, but for some businesses, they can be extremely helpful. That is why debt advisors usually charge a fee of between 0.3% and 0.5% of your monthly repayments. So, why would you want to pay someone a fee when you can go directly to a lender? Well, while most banks can help you find a suitable loan, they don’t have the time or resources to find you the best deal. They don’t care if your interest rate is 20% or 8%, and they don’t care how much you can afford to repay. Business debt advisors, on the other hand, do care about these things. They search for lenders that specialize in your type of business, so you can get a more favorable deal.
What to watch out for when working with a business debt advisor
There are a few red flags you should be on the lookout for when working with a debt advisor. First, make sure that the advisor is certified by the Financial Counseling Association of America (FCAA). This organization holds debt advisors to a high standard of ethics and professionalism. Next, make sure that the advisor is working on commission (not sure how this works? Ask!). This is because some debt advisors may make more money by advising you to take on more debt. Finally, make sure that the advisor is licensed by a state regulatory board.
Bottom line
Business debt advice is generally a win-win situation: businesses receive the financing they need, and debt advisors receive a small commission for helping them. However, it is important to do your research and find the right business debt advisor for your needs. Selecting the wrong advisor could lead to additional debt and increased interest payments.
