Having Trouble Paying Your Small Business Loan? Consider These 6 Moves
Despite your best efforts, there’s always the chance that you may find yourself coming up short on repaying a business loan. If so, you’re not alone. In fact 34 percent of small businesses say that loan repayment poses a financial challenge.
If you’re having trouble paying off a loan, consider one or more of these actions to keep your business moving forward:
1. Review your expenses.
Are there ways to cut overhead and/or find additional capital? Consider having a certified public accountant (CPA) or bookkeeper analyze your finances. For example, reviewing the ups and downs of your monthly cash flow is crucial for long-term loan management. During slow months, you can reduce some expenses to ensure your ability to pay. During high-revenue months, set aside money for future loan payments. Tweaking your financial plan based on your actual monthly performance is especially important for business lines of credit, which permit multiple draws up to the available credit limit.
2. Request an optimal due date.
For instance, if you're often cash-rich mid-month, this may be be the ideal time to make a loan payment.
3. Make extra payments.
When/if your business has surplus revenue and you can manage it, allocate additional funds toward paying down the principal (versus interest) on your repayment. This approach reduces the total interest charges over the life of the loan and lets you to pay off the debt more quickly. Just make sure your loan doesn’t have a pre-payment penalty.
4. Communicate with your lender.
If you’re having difficulty making payments, reach out to your lender – and never avoid their calls and/or notices. Many lenders are willing to work with borrowers who communicate early and may be able to offer options, such as deferring payments temporarily or restructuring the loan.
5. Refinance when appropriate.
You can try to refinance your small business loan if current interest rates are favorable or if you’ve bumped up your credit score. Just remember that refinancing may come with fees and closing costs. As a result, some refinancing attempts may result in little or no change to your monthly payment.
6. Arrange a debt settlement.
If your firm is in dire straits, you may consider a debt settlement. This involves repaying a portion of the loan, based on an amount of cents per dollar on your loan total. However, this will seriously impact your credit score.
You’ll probably want to borrow capital many times over the life of your company. So it’s a great idea to make sure you’re the kind of business lenders like to work with. Start by borrowing only what you need and by making payments a top budget priority.
Since 2008, Fora Financial has distributed $4 billion to 55,000 businesses. Click here or call (877) 419-3568 for more information on how Fora Financial's working capital solutions can help your business thrive.
