Tips to Ensure You Never Default on Your Business Loan

Running a business of your own is undoubtedly one of the most rewarding experiences that you can have in your professional working life. The chance of being your own boss and doing things your own way satisfies your personal aspirations in a big way but running a business entails a lot of responsibility also.

You have to put in extra hours and travel across the length and breadth of the country to ensure that your venture is able to realisethe desired goals. Initially, you must invest your own savings and arrange funds from friends and family to get your business going. But once your personal sources are exhausted, you might still require more money to keep the business going.

This requirement could be due to delayed payments from debtors or some expansion project that you wish to undertake. Whatever be the reason, the fact of the matter is that you need money and must arrange it from somewhere. In such situations, you must apply for a business loan online or offline with any of the numerous lenders functioning in the market.

About Online Business Loans

With the rapid progress of technology, the finance sector has made giant strides in integrating latest technology in the management of the loan process. Online business loans have an easy application process, where you just need to fill in some necessary details regarding yourself and your business and upload some essential financial documents.

When you apply for a Business Loan online, your application would be processed and approved within a few working days, if you meet the eligibility criterion and the disbursals are processed within a few working hours thereafter. Business Loans, whether online or offline, are meant for usage in business only and can be secured as well as unsecured, depending on the amount and purpose for which the money is required.

The tenure for a Business Loan usually varies between 12 months to 60 months,and the rate of interest varies depending on the lender you have chosen. You must continue to repay your EMIs (Equated Monthly Instalments) on time, in order to maximise the benefits from your Business Loans.

How to Ensure That You Never Default on Your Business Loan Repayments?

When you sign the loan agreement for a Business Loan, you agree to repay the EMIs as per the attached repayment schedule. It is imperative that you abide by this schedule because if you default on your Business Loan repayments, not only will you have to incur significant penal charges, but your credit score would also go for a toss. In order to ensure that you do not default on your loan repayments, you must follow the tips that we have mentioned below:

1. Prepare a Repayment Sheet and Set Reminders

Whether you are running only one loan or are running multiple loans, you must prepare an excel sheet for your monthly payment liabilities. These include your Business Loan due dates, Credit Card due dates, telephone bills, utility bills and other recurring expenses.

Once you have this sheet ready with you, you should take a print out and put it up on a pin-up board in the office or on the door of your refrigerator in the home, where you can see it every day. When you have paid the due amount, put a tick in front of that option. This will help you manage your EMIs effectively. You can also set reminders on your mobile phones to help you keep track of your instalments.

2. Keep Adequate Balance in the Account

Ensure that you have maintained sufficient balance in the account at least three days before the scheduled repayment date. Most Business Loan EMIs are processed through ECS (Electronic Clearance Service), which hits the bank account before 8.00 AM on the due date.

So, do not wait for the last minute and make sure that there is adequate balance in the account beforehand. Sometimes, banks levy some charges against your account without any intimation to you, so make sure that you have more than the EMI amount in the account to avoid bouncing.

3. Discuss with the Lender

If you feel that you might not be able to make the payment against your loan EMI on the due date, you must not wait for the EMI to bounce and then talk to the lender. Get in touch with your lender beforehand and explain the entire situation in detail. It is indeed possible to work out something that is for the benefit of both the parties.

4. Debt Consolidation

If you feel that the burden of multiple loans and their EMIs is becoming too much to handle, you can opt for debt consolidation or balance transfer of your loans. This will help you reduce the rate of interest against your loans and also reduce the total EMIs you have to pay in a month. It is easier to manage a single EMI as compared to multiple EMIs.

5. Borrow the Only Required Amount

Whenever you apply for a Business Financing, remember that it is a borrowed capital with an interest liability attached to it. So, you must borrow only that much amount which you require and never borrow more than you can afford to repay. There is no use of keeping borrowed funds in a reserve when you do not need them but are paying interest against them. It is essential for you to manage your Business Loan repayments effectively to maintain a good credit score which will help you avail such facilities in future also.