Commercial Debt Consolidation: 6 Tools Mid-Size Companies Use

When you’re in debt trouble, you can feel it as a daily kick in the teeth. If you’re repaying multiple daily cash advances every month, you might feel your bank account shrinking with each transaction. You have six tools to get out. They are bank or credit union loan, SBA 7(a) loan, SBA 504 loan, online lender, settlement with creditors, and Subchapter V bankruptcy. Which one fits you depends on what kind of debt you have and whether you can qualify for new credit.

One Loan, One Payment Instead of Many

Consolidating means rolling several loans into one. For example, you owe A, B, and C $10,000 each. You borrow $30,000 from D and use it to pay off A, B, and C. All you owe now is D. It’s one loan, one payment instead of many. The monthly payments may feel easier than daily debits. The rate may be lower than the old one. It may be higher, plus fees. Make sure the rate is lower and factor in any fees the lender charges. However, you have to find a lender who will take a risk on giving you money while you’re already having trouble repaying.

If your debts include cash advances, know that a cash advance is often a sale of future receivables. Cash advance companies quote a ”factor rate” like “1.30.” This means if you sell receivables for $100,000, you get $100,000 now but owe $130,000 over time. Each day, the advance company takes from your bank account the daily installments you owe. Even though cash advances are attractive when you’re in financial trouble, many banks won’t accept them.

The first place to look is a bank or credit union, if your business is in decent shape. Rates are competitive if you qualify, but banks insist on good credit scores and solid cash flows. They can also be slow and inflexible. A banker will know you and your business, and might wish you luck with your application - after turning it down for inadequate credit, collateral, or cash flow.

A second option, if you qualify, is an SBA 7(a) loan. Paying off business debt is an approved use, up to a maximum loan size of $5 million. Rates can be lower on 7(a) loans since the Small Business Administration (SBA) guarantees a certain amount for the lender. Your new payment must be at least 10 percent lower than your old ones, with some exceptions. There are downsides. Borrowers must meet strict eligibility requirements. The SBA can also require a personal guarantee, where you put your own assets at risk to secure the loan. There’s a catch - an active cash advance cannot be refinanced. Starting October 1, 2026, it is possible after conversion to a term loan.

Your third tool is an SBA 504 loan. This is for debt on land, buildings or equipment. It has fixed rates and terms of 10, 20 or 25 years. You can only use 504 refinancing without business expansion if you’ve been in business at least two full years, your current loan is at least six months old, and 75% of the money went to fixed assets. The new financing must be no more than 90% of the asset’s value.

If you can’t meet a bank’s requirements, consider an online lender. Applications are simpler, rules looser. Online lenders take more risk, though, and prices show it: they can charge higher interest and tack on extra fees. They also give you less time to repay. Exercise extreme caution if a lender offers reverse consolidation. This means a new, larger advance pays the daily payments on the old ones. There’s a brief pause in the payment cycle, but it typically leads to more debt and higher costs. This way lies despair.

Settle Debts with Creditors

If none of these tools work, your fifth tool is to settle debts with creditors. Try to negotiate a new arrangement that lets you pay less than you owe, with smaller payments or longer terms. A settlement can resolve cash advances a bank won’t refinance. Daily withdrawals become a payment plan if you can get creditors to agree. You won’t need to qualify for new credit because there is none.

It can feel like a low blow to take what seems like a gift and pay taxes on it, but that’s the law: any canceled debt is usually taxable. With bankruptcy, for example, or if you were insolvent, the forgiven amount may not be taxable. Get professional help completing IRS Form 982 to make sure you don’t pay more than you need to.

Your sixth and last tool is to turn to Subchapter V bankruptcy. This is a kind of Chapter 11 reorganization created specifically for small businesses. If your debts are $3,424,000 or less, only you file a plan with the court. It must be within 90 days of filing your bankruptcy petition, unless the court extends it.

Annual Percentage Rate

Before you sign on the dotted line, carefully compare the loan’s Annual Percentage Rate, or APR. Also check origination and application fees and any prepayment penalties. New York law requires APR disclosure only for loans up to $2.5 million.

Be prepared to ask yourself one last thing: are you covering up a permanent revenue shortfall if all you’re doing is moving your debts around? The cause of your cash shortfall won’t disappear because of a new loan. Start by gathering sales, income and expense statements, bank statements and tax returns. Next, read the contracts for every existing debt. Make a list of their balances, interest rates and amounts due every month. Make sure your feet are on solid ground.