TOP 6 WAYS TO PAY YOUR BUSINESS LOAN EVEN IF YOUR BUSINESS IS INCURRING LOSSES!

Running a business definitely requires a lot of effort, hard work, and strategy that ensures your business can thrive or at least float through unforeseen circumstances. However, many a time it becomes difficult to prepare for every unprecedented event or situation, and recent times have shown us just how much.

In the wake of COVID-19, the majority of the SMEs (Small & Medium-sized Enterprises) have been facing a lockdown and are unable to operate for weeks. This has definitely put them through extreme financial stress. Most businesses have to make the tough choice between keeping money to themselves to ensure cash flow during the emergency or use it to pay their business loan EMIs.

Here are the top 6 ways you can try to pay your business loans and take care of your business in such times, even when it is currently incurring losses:

• KEEP A CONSISTENT AND ADEQUATE BALANCE AMOUNT

It is always advisable to have sufficient bank balance so that one can depend upon it when in need. It can act as a reserve amount, to be tapped into, to fulfill such important needs, without hampering the funds allocated for running the business. It can also be viewed as, keeping a reserve back-up of 3-4 months of loan EMI that will be required, and so, if this EMI cannot be withdrawn from business funds due to losses, this reserve fund can save you from defaulting your EMI.

• KEEP REMINDERS FOR REPAYMENT SCHEDULE

Have your payment schedule well organized and easily accessible, so that you have a chance to check for fund availability well in advance. This will also give you a chance to plan your finances and expenses accordingly, make alternate arrangements if needed, especially in situations, like in the case of lockdown due to the coronavirus, when your business is not showing a profit. Timely and regular repayments will maintain your positive image for the lender, making it more conducive for you to avail repayment options if needed later.

• OPT FOR DEBT RESTRUCTURING

The amount to be paid may be substantial for you, especially if the business is small or medium-sized. The terms of the loan may be restructured and rescheduled, even before a condition of possible default arises. Depending on how the business is actually performing and your financial situation, including unforeseen expenses, the interest rates, amount of monthly installment, etc. may be revised. Remember, however, that this will adversely affect your credit score, but this will be a small compensation as compared to defaulting on repayment.

• ENSURE REGULAR & TRANSPARENT COMMUNICATION WITH THE LENDER

This is necessary for the lender to have a clear picture of your financial situation and have enough time to plan for options and measures that may be required. Timely communications will help the lenders in reducing their own paper-work and loss, and you may be able to avoid even one default on your loan. This approach will allow lenders to present you with more options to choose from, minimizing your cost.

• CONSIDER REFINANCING

Several lenders assist in refinancing loans, by providing options of smaller EMIs for longer durations of time. This is a financing option that you may use to avoid short-term loans. Short-term loans require a comparatively larger chunk of funds as the EMIs would be higher. These chunks are substantial enough for you to feel the pinch, preventing you from utilizing them to give a boost to your business. A smaller amount, on the other hand, maybe negligible enough, allowing you to simultaneously invest in your business and repay your loan. This is a precautionary option, depending on your needs and inclinations.

• ALLOCATE FUNDS FOR LOAN REPAYMENT AS A PRIORITY

Proper management of funds, even taking the services of a financial advisor if needed, is very important. All monthly activities, expenses, and requirements are not always uniform. Several tasks may crop up but maybe avoided at present, till the loan is repaid. Such substantial expenses should be avoided as much as possible.

In conclusion, do take steps to manage your funds and especially loans, wisely and prudently. In situations where a business is undergoing loss, study your finances and options well in advance so that both, you and the lender, can take appropriate and timely steps to avoid a worst-case scenario. Be clear and proactive with communications and do not avoid any notice from the lender. Everyone wishes for their businesses to flourish and simple steps can take you a long way. At FlexiLoans.com, our team of experts can help you with the repayment of your business loan and also guide you on how to get working capital for your business.