A small business loan is an important part of keeping a new venture operational in the early days. But for your business loan to be successful, you'll need to ensure that the business can and does pay back its loan in a timely manner. Otherwise, you may end up adding more trouble to your situation. So, how can you set up your business for success in repayment? Here are a few ways that go beyond just remembering to write the check.
1. Communicate With Lenders
Small business lenders want you to pay back your loan so that everyone wins. And while they aren't able to fix all problems, they are often able to work with a borrower at times. Your best bet to get this temporary leeway is to be upfront with the lender and communicate when you have questions or concerns.
2. Pay Early Each Month
Just because the loan has a monthly due date doesn't mean you should wait until it arrives to write the check. You can generally pay anytime in the weeks leading up to the payment date or even make more than one small payment in the month. Getting this out of the way early may save money in interest, and it ensures you aren't ever late.
3. Pay Ahead During Busy Times
When times are good and your business is earning good income, make a point to make extra payments on occasion. You might make additional principal payments which reduce the overall amount borrowed or you could pay a month or two in advance. Then, if you have a particularly lean month, you won't miss a payment.
4. Learn About Cash Flow
Cash flow is linked to, but different from, income. It refers to the actual amount of cash hitting your bank account at a given time versus the amount going out. The more you can manage this flow to ensure a positive amount flowing in, the less you will rely on credit and the more you can meet monthly obligations.
5. Watch Your Credit Score
Your business has a credit score just like you do. Do you pay attention to improving it? This is valuable even after you have secured a loan because it gives the lender more options to work with you in bad times. It also makes refinancing easier and less expensive if you need to do so later.
Want more suggestions on how to approach the management of your small business loan? Start by meeting with a business lender that offers small business term loans in your area. They will help you find the right term loan for your needs and set up a reliable system for paying it. And then you can get back to focusing on growing your business.