A business loan can be a stepping stone for your business. Taking a business loan at the right time and making the right use of the same can make your business grow with leaps and bounds. The fund from a business loan can enable you to buy new equipment for your business, hiring new talents, renovate your office, opening an outlet and so on. So, your business will experience growth once the loan amount is used in the right place.
If your business is a small one, getting approval on a business loan application is difficult. But never to forget the fact that benefits are also more when you get a fund for your business at the early stage. The lower number of business loan approval is a result of high risk at the lender’s end. The number of NPAs are really high in the case of small business loans. One of the major reasons for the inability of paying off small business loans is the lack of management in small business. So, if you are fortunate enough to get approval on your business loan application, you are to manage your business finances well and keep an aim to pay your business loan on time. The business loan applicant should always check business loan EMI before opting a loan. So, You can plan your finance in a better way.
Make a Smooth Payment of a Business Loan
Map Out Your Debt
Before you start making plans to repay your business loan in a smooth manner, you are to find out the exact debt you have at that present moment. Be loyal to yourself and make a note on the exact amount you owe to any lender. Along with the lender, you are to be crystal clear on all kinds of debt if you have more than one. Once you find the total loan amount, find out the maximum amount you can pay towards the loan repayment.
Transfer to Low-Interest Rate Loans
Such situations may arise when you are in an urgent need of money and took a business loan at a high-interest rate. Once the emergency is settled down, you can search for loan options with a comparatively low-interest rate. If you find such loans, you can make a balance transfer of your business loan which will minimise the interest component. Hence you will be able to pay off the loan sooner.
Cut Down Expenses
This is the thumb rule of getting out of any kind of debt. If you are under any kind of debt, may it be a business loan or a personal loan, you should always try to cut down the expenses in your business as well as in personal life. The cutting down of business makes you save some money. Once you save a considerable amount you can use it towards part payment of the loan.
Top 6 Financial Habits that will Help You to Get a Business Loan Easily
The Stack Method
This is a loan repayment strategy where the borrower gives preference to the loans which are expensive. If you have a number of loans with different interest rates, you can give priority to paying off the loans with high-interest rates. When it comes to making an extra payment towards any of the loans, the high-interest loan should be the first one to pay.
The snowball debt reduction method is one of the most adopted debt reduction methods worldwide. In this method, the loans which have a low outstanding balance are paid off first. This method makes the loan repayment more streamlined. A big number of loans may be frustrating for any small business owner. In such situations clearing one or two debts give you confidence that you can achieve freedom from all debts just like the previous ones. Moreover, once your small loans are paid off, you can save some money which can be saved for repayment of loans of bigger amounts.
Automate Your Payments
The auto debit of loan EMIs is considered to be the best repayment option as the chances of EMI bounces are very less. Automated loan payments make the auto deduction of EMI on a fixed date every month. This method of loan repayment is best when you want to make a budget.
These are 3 of the most common ways of automated monthly payments:
Have your lender withdraw it
Through your online bank account
With your credit card
Business Debt Consolidation
The business debt consolidation method is used when a business has more than one loan. During those situations, one can consolidate multiple debts to one single loan. In this method, business takes a new loan which is equivalent to the amount of the total outstanding amount of all loans. In this way, the business has to pay only one EMI. So loan management as well as making budget both will become easier.
The Last Lines
In order to run a business, one needs to put a lot of effort which is strategic. The business plan is needed in every step of the loan, including debt repayment. So, adopt a strategy and stick to it so that being free from debts becomes an easy affair.