Many business owners take Business Loans to give their small businesses the much-required cash support. In fact, it can be the best way to get a business off the ground if the borrower manages the debt effectively. Now that the borrower has obtained a Business Loan in India via an online application and the dream enterprise is all set to grow, what’s next? Repaying the loan on time according to the loan schedule.
Most business owners get jitters when they think about loan management. They consider it a highly complicated process that needs meticulous planning. However, it is just a matter of disciplined financial planning and debt management to repay the loan without hitches. Here’s a look at how to manage a Business Loan responsibly.
Starting the Loan Repayment in Time
Most Business Loan providers require borrowers to start EMI payments from the next month of receiving the loan. However, depending on the lending institution and the repayment structure, it may vary. While overdraft facilities and lines of credit do not have fixed repayment plans, unsecured business Loans need repayment in monthly installments. Use a business loan EMI calculator to work out a repayment plan accommodating the business income and cash flow.
Thoroughly Assessing the Finances
Borrowers must evaluate their company’s finances in-depth and honestly assess the funds. It’s crucial to stay within the loan limits after determining the business’s capital requirements. Any business, irrespective of its size and industry, requires budgeting. Finding that is only possible by assessing the company’s finances.
Understanding the company’s budget assists in applying for an adequate loan amount to borrow. Only borrow the required amount, as it may make the repayments less manageable and cause them to add up and quickly go out of control. Avoid taking more than the required amount by making a well-planned business budget.
Managing the Cash Flow
Managing the cash flow is vital to having a healthy company budget. Company owners can only meet their business expenses or pay EMIs on time with efficient cash flow management. A Business Loan EMI calculator is an efficient online tool that helps calculate the EMIs and select a loan term with affordable repayments. Make a solid repayment plan to never default on payments. Those having trouble paying the EMIs can reduce their cash outflow by minimising unnecessary expenditures.
Always Keep Personal Finances Away from Business Expenses
Every business owner must have received this advice from others. Those who consider it a waste piece of advice must think again. Separating personal finances from business expenses keeps future financial issues at bay while protecting personal assets. If litigation occurs in the future, the entrepreneur’s assets will remain unaffected.
Increase the EMI Amount Whenever Possible
Managing a business loan online in India is mostly about smart repayment. If the business receives more cash during peak seasons, the owners can use it to repay their loans. Doing that will substantially reduce the interest burden. Borrowers should deposit more funds into their loan account whenever possible to repay the loan faster and save money on the interest cost. Otherwise, if the interest rate is very high, the borrower may pay more interest than the borrowed amount. Making additional payments whenever a surplus amount is available will help avoid this.
Keep Tabs on the Credit Score
Maintaining a healthy credit score puts borrowers in a better position to grab better debt deals with the financier. A credit score above 700 means they can work out better loan plans to pay off the debt faster and reduce the minimum repayments. Loan seekers can review their credit scores through credit reporting agencies or third-party service providers. However, it’s important to understand what factors affect it, including the following:
- Payment history, which should be consistent and timely
- Borrowed amount compared to available credit
- Length of financial history and records of open accounts
- Number of credit applications
- Types of debt in the portfolio
When borrowers feel distressed about managing payments, they must contact their lending institution right away to discuss the situation. Most NBFCs are ready to assist their borrowers with an alternate repayment plan. If they act promptly and avoid making late payments, they can most effectively manage their Business Loans online in India.
About the Author
Amaira Sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.