Starting up a business is a daunting task, especially when it comes to finding seed money. But It is equally challenging to keep the business up and running. A small business needs consistent working capital to fuel growth of the businesses, fulfil large orders, and to purchase, replace, repair, or upgrade various kinds of equipment. This is where taking a business loan comes into the picture.
However, repaying a business loan is a thought that can add to the tensions of running a business. Such times tend to put you in a dilemma – to retain funds for your business or to repay the loan. To maintain your credit score, you should avoid defaulting on the loan. Here are a few ways that you can follow to pay your business loan on time.
- Keep an adequate bank balance: Maintaining sufficient amount of funds in your bank comes handy in desperate times. This reserve can be tapped into, to pay your loan EMI without disturbing these reserve funds for business needs.
- Keep a check on your repayment schedule: Stay on top of your repayment schedule by setting reminders. A schedule will help you check on fund availability in advance, thereby helping you plan your expenses accordingly. Making regular and timely payments will help you build a good credit score, allowing you to explore other repayment options, when required.
- Debt restructuring: If your business is small or medium-sized, the amount payable may be significant for you. You could get the terms of the loan restructured or rescheduled before the condition of default arises. This means, you can get interest rates, monthly instalments, etc. revised. However, it must be noted that it can adversely affect your credit score.
- Refinancing: There are many lenders who offer refinancing options by providing smaller EMIs for long periods. Since short-term loans have higher EMIs and need you to have more funds, it prevents you from utilising the money for your business. A smaller EMI amount allows you to repay your loan and invest in your business at the same time.
- Allocate funds for loan repayment: It cannot be denied that each month’s expenses are likely to be different. Several unforeseen expenses may crop up, but some can be avoided. Your primary focus should be on the proper management of funds. Allocate funds for loan repayment as a priority.
To sum up, you must take steps to manage your funds wisely especially when you are a small business. If your business is likely to suffer losses, you should plan your finances beforehand and take timely steps to avoid defaulting on your loan.