Getting a business loan can be the next best thing you can do for your business. Paying back the loan is another story, as you need to ensure that you catch up to the repayments according to the loan terms. On the plus side, when you follow through with repayments, you get to improve your credit score. This guide will show you what to expect in loan repayments and how to repay a loan more efficiently.
How To Approach Loan Repayments
You don’t have to worry too much about how you’re going to repay a loan. Take a step back and analyse your finances. From there, you can make a strategy on how to pay them off effectively without compromising your savings. Here are some tips to get you on the right path:
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Set a Budget to Everything
It may sound simple, but setting up a budget can do wonders for your finances. Take a good look at your balance sheets and determine which expenses leak your cash flow. Mitigate unnecessary expenses and do away with other purchases that can be prioritised later.
Once you’ve set a budget, you’ll know how much to loan and what type of financing to go for. Resist the temptation of loaning a larger amount than what you need, as paying it off may become more difficult. Remember to use the loan for the purpose that it is intended for, as using it for other means may get your finances out of control.
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Manage Your Cash Flow
Use cash flow tools to track incoming and outgoing money in your business. Cash flow tools will help you make projections on the amount of cash coming in that you can set aside for loan repayments. From here, you can determine how much is left for personal expenses and sustaining your business.
Tracking your cash flow will help you determine whether you should postpone other purchases, slow down on restocking supplies, and do other cost-cutting activities.
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Take Advantage of Seasons When Cash Flow is Good
Taking on a small business loan is better when cash flow is going strong. If you’re in a busy period in business, you’ll be able to pay off the debt more than the required monthly payments.
If your credit score is superb, and you can show good monthly cash flow, lenders would be most likely to approve your loan application. You can also get loans at more competitive rates with your good credit history and positive business finances.
How to Repay a Loan More Efficiently
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Make Bi-Weekly Payments
Bi-weekly payments will save you a lot of trouble in the long run. When you submit half of the payments every two weeks to your lender, less interest will accumulate. You will also get to pay an extra payment because 26 year yearly payments amount to one additional payment. This will shave off several months for the term of the loan.
Do make sure to discuss this first with your lender because you might incur penalties for any extra payments.
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Make One Extra Payment at the End of the Year
If you can’t make bi-weekly payments, you can opt to make one extra payment per year to pay off your loan earlier. Set aside any money you get from additional profits or tax refunds. You can pat yourself at the back for following through with loan repayments as efficiently as possible.
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Round Up Your Payments
Rounding up payments, such as paying $400 instead of the required $360 of monthly payments, will give you the upper hand in paying a loan off. You don’t need to have a lot of extra funds to repay a loan as soon as possible, because the additional cash you inject in rounding up will accumulate. Over time, it will all add up to a significant amount, saving you money on interest and shorten the term of your loan.
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Boost Your Cash Flow
Find ways to boost the cash flow coming into your business. You can sell old stocks or equipment in prices that attract more people. Any additional income should be set aside in paying your loan. Even though you might earn money in small amounts, it will soon add up to something bigger that can slash off loan repayments.
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Consider Refinancing
There are local banks and credit unions which offer low-interest rates on loans. It’s an easy way to lower your payment, save in interest rates, and pay off your loan as quickly as possible. Take advantage of options that offer interest rates lower than your loan’s current rate or 0% interest.
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Maintain a Good Relationship with Your Lender
If you have a good working relationship with your lender, you can negotiate an extension in case you’re late in loan repayments. You can also arrange a better repayment plan if ever you need to.
Start Your Way to Better Financing
Bizzloans has a network of the best online lenders who offer loan terms that perfectly suit your business. Comparing loans here won’t affect your credit score. Save time and effort by getting a free quote below, and we’ll match you to the perfect financial solution.
No Security Necessary
The main thing that makes unsecured loans more attractive than secured loans is the fact that they’re no security. It might be an obvious thing to highlight but it clearly matters. You won’t be weighed down by the pressure and worry associated with having collateral hanging over you and potentially being lost to the lender if you fail to make repayments. If you don’t want to take the risk of losing your collateral, you just need to opt for an unsecured loan instead. It’ll allow you to avoid any risks associated with secured loans.
Build Up Your Future Credit Score
By taking out a loan and then paying it off on time, you will help to build or repair your credit score. Many companies are dealing with poor credit, but by taking out an unsecured loan with a lender that is happy to lend to companies with poor credit, you can start to turn the situation around. Meeting regular repayment deadlines shows the world that you are able to stay on top of your financial obligations and pay off the money you owe, and that will only help your business going forward.
Why Your Business Might Want to Take Out an Unsecured Loan
There are lots of reasons why your business might take out a loan, as well as reasons not to. You shouldn’t take out a loan to cover running costs, but if you want to do other things, such as the things we’re going to discuss below, an unsecured business loan can be ideal.
Grow and Expand
Most entrepreneurs have big plans for their businesses. They want to ensure that their business is one that’s got a bright future. So if the time has come for you to grow and expand your business, you should think about whether taking out an unsecured business loan might help you to do that. It could be exactly what you need to get your business moving in the right kind of direction. It takes money and investment to grow your business and a loan might just be the ideal solution.
Take on More Clients and Customers
If your business doesn’t currently have the resources to deal with more customers and clients, it could be time to scale things up. However, that’s something that costs money, whether you like or not. Taking out an unsecured business loan could help improve the resources your business has available. It could mean hiring more people so that you have the human resources needed to take on more clients and make more customers happy. The loan will cover the costs associated with doing that and it’ll pay for itself if you’re able to improve your profits as a result.
Fund a New Marketing Campaign
Maybe it’s the case that attracting new customers to your business is where your problems lie. It’s not always easy to get your voice heard and make people aware of why they should be taking notice of your business. An unsecured loan could be used to fund a new marketing campaign that gets your message out there and makes more people interested in your business and what it’s offering. So if you have an idea for a marketing campaign that you think might work but you don’t have the financing for it, consider a loan.
Improve with Fewer Risks
The chance to improve your business in the many ways mentioned above offers you a real opportunity that you might want to grasp. Secured loans can offer the same access to financing but come with more risks to your business. With an unsecured loan, you can reap all the rewards that come with having the cash to invest in your business without having to worry about the risks adversely affecting the business in the future. The chance to improve with fewer risks attached to that chance should not be ignored or dismissed.
The Requirements for Getting an Unsecured Business Loan
There are some requirements you’ll need to be aware of before you take out an unsecured business loan. These aren’t too harsh or restrictive at all, but they are important.
24 Month Limit
When you take out an unsecured loan from Bizzloans, you have to pay the loan back within 24 months. That’s the maximum repayment term that’s on offer. Of course, that won’t be a problem for the vast majority of businesses out there. It’s important that you look at the finances closely and decide for sure that this is something your business is going to be able to do. You’ll have a chance to do this when you get a quote from us, so you’ll know exactly what you’re signing up to.
Business Bank Statements
To ensure your business is in a financial position to take on a loan of the size you’ve applied for, you’ll need to simply submit your business’s bank statements. This allows us to ensure that we lend responsibly and don’t burden you with a debt that is too much for you to take on. It’s in both your best interests and ours that you’re able to handle the loan that you take on.
Photo ID
To ensure everything is correct and proper, and you are who you say you are, you have to submit a photo ID. This is common practice and ensures that all financial transactions are above board and in order. It’s very easy to do and needn’t be a headache for you. Once we are satisfied with your application, you’ve provided the bank statements and we’ve checked your ID, it won’t be long before you have access to the loan you applied for.
Getting an unsecured business loan for your company could be just what it needs right now. It’s a much safer option than taking out a secured loan and you’ll be accepted much faster. Don’t hesitate to get in touch with us here at Bizzloans if you’re thinking of taking out an unsecured business loan.
