A small business loan is sometimes necessary for many business owners to fund growth or meet other short-term cash flow needs. Whether you’re just starting out, looking to expand, building inventory, or just need a little extra capital, securing a loan is a process that many business owners will need to take at one point. Loans need not cause you uncertainty—as long as you have a plan in place for paying them back.
Here are three simple tips that will make repayment easier:
- Pick the right loan.
As a business owner, you have more options today than ever before. Make sure you understand the type of financing you’re applying for, how it will meet your financing needs, and what is expected of you. You should definitely know ahead of time exactly how much capital your business needs and what that capital will cost to borrow. Do the math ahead of time to avoid unnecessary surprises.
- Plan for the payments.
Make sure you understand the frequency of the periodic payments—are they daily, weekly, or monthly? Make sure you understand when the first payment is due and plan accordingly. Don’t automatically assume you’ll have a month before your first payment. Your lender should make sure you understand when your payments are due so you can determine if it’s manageable for you and your business. Don’t necessarily be afraid of daily or weekly repayment schedules either, many borrowers find they help them avoid what’s sometimes called lumpy cash flow issues.
Giving your loan payments a high budget priority is the best way to establish, build, or strengthen your business credit profile. You may want to consider reworking your forecasts now that you have an extra financial responsibility. Always make your loan payments on time. Make sure you understand ahead of time what what will happen and what kind of penalties will be imposed for late payments. Talk to your lender as soon as you can if you think you may be in danger of missing a payment. Most lenders want you to successful repay your loan and will work with you if there is a short-term challenge.
Find a lender you trust, select a loan that’s right for you, and make sure you have the means to make regular and timely payments—your business will benefit as a result.