Business Loan – A boon for small & medium-scale businesses
A business loan can make a huge difference in the way small businesses operate. Business loan is a popular option for most business owners when they’re looking for additional funds to address cash flow issues, acquire a new and improved machinery/equipment, invest in marketing plans, or simply upscale operations by adding a new location.
A business loan can fulfill both short-term and long-term goals and cater to the immediate financial requirements too. Since these business loans help bolster your business operations, it goes without saying that you repay the loan amount responsibly. Being careless with repayment of the loan amount can be disastrous for your business in the long-haul as it will impact your credit score negatively which in turn will lead to a rejection of any further loan applications.
To avoid falling behind on a loan repayment, it’s important you set some ground rules and stick to them till the loan is paid off. Let’s discuss these in detail.
Best Ways to Pay Back Your Business Loan
Planning is the first step when you set your mind on taking a business loan for your venture. Planning to avail and repay a business loan should be articulate enough to tell what you’re doing and where it is going to take you in the future. Your plan should clearly consider incomes, costs, and backup sources to fall back on for repayment of the business loan in the case the planned approach fails.
The ideal approach is to get started with planning for a year or two and then continue with the same one if you’re successful with that.
Reduce the Costs
When you sit down to make a plan to repay the loan, you already know what your current business costs are. You should consider decreasing every single unnecessary cost that you possibly can while leaving out adequate funds for business promotion. The focus of your plan should be on tightest cost reduction model while effectively and efficiently optimizing the resources at hand.
For instance, going for free windows of business marketing and gradually switching to the paid ones when you start getting in the desired revenues and harnessing the option of outsourcing models to bring down the cost of having all resources in house.
Making repayment of business loan your prime target along with cutting down most unnecessary resources will help you repay the entire loan amount without any hassle.
Increasing Sales & Revenue
While cutting down on costs is one aspect, one should also focus on how to drive more sales and increase the revenue. Reducing the costs alone won’t help much if you don’t have a strategy to stabilize sales. One should research and chalk out a fool-proof plan in a way that takes care of sales and drives in new customers.
Understand the A-Z of Your Business Loan
It’s important that after you’ve set your mind on applying for a business loan, you should carefully research and find out everything about business loans. Read or ask to understand the banking terms used by lenders in general or in documents. Terms like loan repayment dates, tenor, penalty clause, credit score, interest rate, charges, and more.
Paying More Than the Required EMI
This not just applies to a business loan but for every credit instrument. Paying more than what is required is always a good practice as it keeps bringing down the principal amount. Paying a surplus amount than your fixed EMI a few times a year will only help you repaying the loan sooner than the end of its tenor.
Keeping a Close Check on Your Business’s Financial Health
Considering you know how important a business loan is for meeting the additional business expenses, you should take every possible measure to repay it diligently. Keep a close watch on your business’s financial health and watch out for the following:
- Strictly follow a budget plan with the focus on repaying the loan amount
- Don’t be tempted to use the funds from the loan to pay for unnecessary expenses
- Seek help from your business loan lender in case you’re facing difficulty paying the loan installments. They can offer renegotiating alternatives or suspend an installment or two in special cases (conditional).
Schedule Automatic Payment of Loan Instalments
Missing out or delaying the payment of a loan instalment can have serious repercussions and hurt your credit rating/score. The best approach is to have a steady process of loan payments that doesn’t leave any room for missed payment.
Setting up an automatic debit process of the loan instalment when it’s due is the best approach. Most lenders encourage having an ECS where the loan EMI is auto-debited at the due date from the borrower’s bank account provided by him during loan application. It spares the borrower from the hassle of remembering the due date every month and going around to deposit the EMI in cash. Make sure that your bank account has sufficient funds to process the EMI amount.
We love to see businesses flourishing and scaling new heights. If you need a business loan to finance the growth you’ve envisioned, reach out to us at email@example.com.
We offer business loan at a competitive rate of interest with customized repayment tenor to help businesses take care of the financing requirements.