4 Ways Small Businesses Can Keep Ahead of Loan Payments
Small businesses often need to take out loans to get started or pay for unexpected expenses. It can be a great way to obtain the capital needed to get your business off the ground. However, it is important that you make your payments. Staying ahead of loan payments and proactively planning will help your business be a savvy borrower and stay out of debt.
It also endears you to your lenders, making it easier for you to get future loans. Be aware of these methods that can help your small business stay ahead of its loan payments.
Budget Properly
The first and most important step to staying on top of small business loan payments is to properly budget for them.
Know when payments are due and set aside sufficient revenue to cover them. This simple planning can prevent you from missing payments or being put in a situation where you cannot afford to pay.
Once you have a budget in place, be sure to adhere to it. Borrow only what you need, not the higher limit you’ve been approved for, and be meticulous in your calculations and adherence to your budget.
This helps you avoid debt you didn’t plan for, and makes it easier to calculate and set aside loan payments.
Control Expenses
In order to ensure you have enough money to cover loan payments, you need to be mindful of your small business’ expenses.
For example, you shouldn’t make any unnecessary purchases, especially large ones, until your debt is paid off. Be frugal and control your expenditures. If you can make more than the minimum required payments, do so.
As a general rule, excess money should go towards loan payments immediately after necessities.
Be mindful of what your business actually needs to succeed—do you really need a new office remodel, or do you just want one?
On the other hand, if your loan is specifically so you can get a better office to improve your product, don’t waste excess money on frivolities the space doesn’t need.
Control your expenses and keep track of what you are buying. You will pay down your debt faster, freeing up your finances for other business expenditures.
Pay Strategically
For small businesses that have to pay back multiple lenders or entities, it is almost always a good strategy to focus on one source of debt to pay down first before you switch to the other.
You can choose to either focus on a smaller debt before tackling a larger one or identify the debt with the higher interest rate to pay off first.
Both are effective strategies for minimizing interest charges as you pay off debt.
By paying strategically, you minimize the confusion and stress of having to communicate with multiple parties or different interest rates.
Plan out your strategy for loan repayment and then stick to that plan to stay ahead of your bills.
Seek Help
In the event that your small business is struggling with its finances, it may be best to seek help.
Enlisting the aid of a dedicated accountant can help you budget correctly and control your expenditures, as well as give you solid financial advice to stay in the black.
Working with credit card processing companies can help you get paid faster and provide relief.
In a worst case scenario, attorneys and debt management agencies can help you shift debt around, renegotiate payment plans or even seek legal relief from debt.
Failure to stay on top of your small business’ payments can cause significant issues, such as spiraling debt due to interest.
Protect your small business by using loans strategically and having solid plans for paying them off.
Doing so will help not only keep your company in business but allow it to thrive.
Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most of her time hiking, biking, and gardening. For more information, contact Brooke via Facebook at facebook.com/brooke.chaplan or Twitter @BrookeChaplan
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Category: Business
