It seems to be quite exciting when the Bank/ NBFC say that you loan amount has been granted and especially for Business Loan. Business loan seems to be a great option to expand an office space, buying new machinery, recruit more people or manage day to day expenses. Whether you opt for a traditional bank loan or any other alternative lender, the newly borrowed funds will help to achieve your goals, make important changes and continue to grow. A business loan gives wings your small business as a much needed cash injection. It’s not a bad idea to be under to be a debt cloud. In fact, if the loan is managed properly, it can prove to be the best way to light a fire under your business. It can help to multiply the profits but needs to be managed carefully if you want to reap the full benefits while keeping the costs in control.
Keep informing your Bank/ NBFC about the major happenings in your business. Even if it is a profit or any kind of a loss, inform your lender about it. Communication with your lender on regular intervals brings confidence that helps to improve the relationship. It is always good to have healthy relations with your lender.
Say no to missed payments
It is quite obvious that when we have borrowed a loan, we have to repay it on time. Be disciplined on the repayment of your EMI’s and never miss on it. Even if you are unable to repay the entire amount, it’s better to discuss with your lender to fix a minimum amount which can be paid. It is important to maintain a good credit score and healthy relationship with your lender. (Know the modes of Repayment of Loan)
With any kind of a sudden gain in your business can give you a reason to pay an extra amount to get off with your liabilities on an early date. Always compare your rate of interest on savings and your loan interest rate. If you find that investing this money can give more returns than do that as soon as possible because these results will help you to refund money towards your loan.
Use money effectively
There are strong reasons to borrow a loan regarding your business. Keep those reasons in mind and use the borrowed money effectively. Spending this money on your personal expenses or for paying off your other debs can harm your business and also your reputation as a businessman.
Loan management can be best done by sticking to your budget. Then only the borrowers come to know where the capital investment is done. A certain part of capital as an investment, or a down payment or even this capital can be used as to organize a conference.
Keep an eye on your credit score
A healthy credit score put you in a better position to negotiate on your terms and conditions with your lender. A higher credit rating could allow you to pay off your loan faster and reduce the payment liability. Certain things should be remembered that affects the credit score. (Credit Score- A Complete Guide)
Avoid new Debts
To pay-off the loan needs a lot of discipline. If you are already have trouble in handling on your current repayments, your first way should be to cut off the current costs and find ways to increase the sales. The other option can be to consolidate your current loans and transfer them to a new lender that gives you a hassle free way to pay off. You can also consolidate your small unsecured loan to secured ones like mortgage.
Review interest rates
If the interest rates on your current business loan are significantly higher than the rates available with other lenders, refinancing can be considered to obtain a loan with lower EMI’s. A successful financial management is indicated with a higher credit score and before going to any new Bank/ NBFC it’s better to review the credit report.
Debt management is an important part to sustain your business’s cash flow. Reduction on expenses and increasing the revenues can help to manage your business debts effectively. Before borrowing a new debt, it is better to discuss with your current lender or the financial institution about the current available options for your business. The above points can guide you to manage your business loan. With a little discipline loan management skills will come through.