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SBA 7(a) & 504 Highlights
- Loan amounts from $100,000 up to $15 million+ (program-dependent).
- Up to 90% financing for eligible acquisitions, real estate, and equipment.
- Use funds for working capital, refinance, expansion, and partner buyout.
- Longer terms (up to 25 years on real estate) to keep payments manageable.
Debt Snowball vs. Debt Avalanche: Which is the Best Strategy for Indiana Businesses?
Are you a business owner in Indiana struggling with debt? You’re not alone. According to a recent study by Experian, Indiana ranks 20th in the nation for the highest average debt per person, with an average of $6,958 in credit card debt per individual. This debt burden can be even heavier for business owners, who often take on additional debt to fund their ventures.
As a financial advisor at GHC Funding, I have seen firsthand the toll that debt can take on Indiana businesses. Many business owners come to us feeling overwhelmed and unsure of how to tackle their debt. That’s why it’s important to understand different debt repayment strategies, specifically the Debt Snowball and Debt Avalanche methods, and how they can benefit Indiana businesses.
The Debt Snowball Method
The Debt Snowball method is a debt repayment strategy popularized by financial guru Dave Ramsey. This method involves paying off debts from smallest balance to largest balance, regardless of the interest rate. This means that even if a larger debt has a lower interest rate, it will still be paid off after smaller debts with higher interest rates.
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⚡ Key Flexible Funding Options:
GHC Funding everages financing types that prioritize asset value and cash flow over lengthy financial history checks:
DSCR Rental Loan
- No tax returns required
- Qualify using rental income (DSCR-based)
- Fast closings ~3–4 weeks
SBA 7(a) Loan
- Lower down payments vs banks
- Long amortization improves cash flow
- Good if your business occupies 51%+
Bridge Loan
- Close quickly — move on opportunities
- Flexible underwriting
- Great for value-add or transitional assets
SBA 504 Loan
- Low fixed rates through CDC portion
- Great for construction, expansion, fixed assets
- Often lower down payment than bank loans
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For example, let’s say you have four credit cards with the following balances and interest rates:
- Credit Card 1: $5,000 at 10% interest
- Credit Card 2: $7,000 at 15% interest
- Credit Card 3: $10,000 at 20% interest
- Credit Card 4: $2,000 at 12% interest
Using the Debt Snowball method, you would prioritize paying off Credit Card 4 first, then Credit Card 1, then Credit Card 2, and finally Credit Card 3. The idea behind this method is to gain momentum and motivation by paying off smaller debts first, even if it means paying more in interest overall.
The Benefits for Indiana Businesses
The Debt Snowball method can be particularly beneficial for Indiana businesses for a few reasons.
Firstly, it can provide a sense of accomplishment and motivation for business owners. By paying off smaller debts first, they can see tangible progress and feel more motivated to continue tackling their larger debts.
Secondly, it can also free up cash flow for the business. As each debt is paid off, the monthly payments for that debt can then be put towards larger debts, reducing the overall financial burden on the business.
Common Mistakes Indiana Business Owners Make
While the Debt Snowball method can be effective, there are a few common mistakes that Indiana business owners make when using this strategy.
One mistake is focusing only on the size of the debt, rather than the interest rate. This can result in paying more in interest overall, as higher interest debts are paid off after lower interest debts. It’s important to carefully consider both the balance and interest rate of each debt when using the Debt Snowball method.
Another mistake is not prioritizing business debts over personal debts. As a business owner, it’s important to separate personal and business finances. This includes prioritizing business debts over personal debts in a debt repayment plan.
The Debt Avalanche Method
The Debt Avalanche method, also known as the Debt Stacking method, focuses on paying off debts with the highest interest rates first. This means that even if a higher interest debt has a smaller balance, it will still be paid off before other debts with lower interest rates.
Using the same example as above, the Debt Avalanche method would prioritize paying off Credit Card 3 first, then Credit Card 2, then Credit Card 1, and finally Credit Card 4.
The Benefits for Indiana Businesses
The Debt Avalanche method can be advantageous for Indiana businesses for a few reasons.
Firstly, it can save money on interest in the long run, as higher interest debts are paid off first. This can be particularly helpful for businesses with larger debts and higher interest rates.
Secondly, it can improve credit scores. Paying off high interest debts can decrease credit utilization, which is a key factor in credit scores. This can lead to a higher credit score, which can open up more financial opportunities for the business in the future.
Common Mistakes Indiana Business Owners Make
Similar to the Debt Snowball method, there are a few common mistakes that Indiana business owners make when using the Debt Avalanche strategy.
One mistake is not considering the minimum monthly payments for each debt. If a high interest debt has a large monthly payment, it may be difficult for a business to keep up with while also paying off other debts. It’s important to carefully consider the minimum payments for each debt when using the Debt Avalanche method.
Another mistake is not taking into account any potential balance transfer fees or penalties. If a business is planning on transferring high interest debts to a lower interest credit card, they should factor in any fees or penalties associated with the transfer. This can affect the overall cost savings of using the Debt Avalanche method.
Indiana Business Owner Case Study
To better understand the impact of different debt repayment strategies on Indiana businesses, let’s take a look at a real life case study.
Sara is the owner of a small business in Indianapolis. She has accumulated ,000 in credit card debt while trying to grow her business. Her credit score is 650, and she is struggling to keep up with her minimum monthly payments due to the high interest rates on her debts.
After consulting with her financial advisor at GHC Funding, Sara decides to use the Debt Avalanche method to tackle her debt. She prioritizes paying off her two highest interest credit cards first, which have interest rates of 20% and 18%. After six months of strict budgeting and allocating extra funds towards these debts, Sara is able to pay them off completely.
Next, she focuses on her two lower interest credit cards, which have rates of 15% and 12%. With the momentum and motivation from paying off her higher interest debts, Sara is able to pay off these two cards within a year.
Overall, using the Debt Avalanche method, Sara was able to pay off her $20,000 debt in just 18 months, saving her over $3,000 in interest compared to using the Debt Snowball method.
Frequently Asked Questions
1. Do I need a good credit score to use these debt repayment strategies?
While a good credit score can certainly help, it is not a requirement for using the Debt Snowball or Debt Avalanche method. The key is to have a solid understanding of your debts and the ability to budget and allocate funds towards paying them off.
2. How long does it typically take to see results using these strategies?
The time it takes to see results will vary for each business depending on their individual debt situation. However, with determination and diligence, many businesses can see significant progress within a year or two.
3. What are some other common mistakes that Indiana business owners make when it comes to debt repayment?
Some other common mistakes include not seeking help from a financial advisor, not prioritizing high interest debts, and ignoring late fees and penalties.
4. Can I use a combination of the Debt Snowball and Debt Avalanche methods?
Yes, you can customize these strategies to fit your specific needs and debt situation. For example, you may choose to use the Debt Snowball method for personal debts and the Debt Avalanche method for business debts.
5. How can GHC Funding help Indiana businesses with debt repayment?
At GHC Funding, our experienced financial advisors can help Indiana businesses develop a customized debt repayment plan based on their unique needs and goals. We can also provide resources and support to help businesses stay on track and achieve long-term financial success.
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Find the Right Financing for Your Real Estate or Business Project
| Loan Type | Best For | Rates | Terms | Highlights | Apply |
|---|---|---|---|---|---|
| DSCR Loan | Rental properties (LTR & STR) | 5.99%+ | 30-year fixed, IO options | No income docs, fast approvals, great for investors | Check My Rate |
| Construction Loan | Ground-up, fix & build, major renovations | 8%–12% depending on scope | 12–24 months interest-only | Flexible draws, great for builders & developers | Get a Quote |
| SBA Loan | Business acquisition, working capital, CRE | Prime + spread | 10–25 years | Lowest down payments, long terms, best for business growth | See My Options |
Take Control of Your Debt Today
If you’re a business owner in Indiana struggling with debt, it’s time to take action. By understanding the different debt repayment strategies available and seeking guidance from a financial advisor, you can take control of your debt and pave the way for a brighter financial future for your business.
Ready to get started? Contact GHC Funding today to learn more about how we can help your Indiana business thrive.
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