How To Plan Out Your Business Loan Repayments

Your business loan application has been accepted, you've secured a business loan, and it's time to turn your dream enterprise into a reality. However, repaying your loan as per the agreed schedule is also very important. While this may seem daunting at first, it's simply a matter of disciplined debt management and financial planning. 

In this blog post, we'll guide you through the process of planning out your business loan repayments and a few tips to ensure you can fulfil your financial obligations without any stress or hurdles.

Understanding business loan repayment timeline

The repayment timeline for business loans varies depending on your lender and the type of loan you have availed. While most loans require immediate repayment from the next month, Line of Credit or Overdraft facilities may not have a fixed repayment schedule. 

It's crucial to communicate with your lender to determine the business loan repayment plan that suits your cash flow and monthly income.

How are the repayments made?

Gone are the days of visiting branches and waiting in long queues to deposit cash or fill up deposit slips. With advancements in technology, there are now multiple convenient channels available for loan repayments. These include standing instructions, NEFT mandates, ECS, net banking, UPI, and other digital payment methods. Embracing these online platforms ensures quick and instant payments, minimising the chances of late payments or defaults.

Simple strategies for smooth business loan repayment

To ensure smooth business loan repayment, here are some simple yet effective strategies:

1. Do a thorough financial assessment

Take an honest look at your working capital requirements and ensure that you are within the limits of your business loan rates. 

2. Manage your cash flow

Without adequate cash flow, meeting expenses and paying monthly EMIs become challenging. Make use of online tools and resources available like a business loan calculator to manage your cash flow effectively. If you encounter difficulties making your business loan repayments, consider cutting unnecessary expenses to reduce cash outflow.

3. Separate business expenditure from personal finances

Never mix business expenditure with personal finances. Separating these two not only prevents future financial problems but also safeguards your personal assets in case of any legal issues. 

4. Increase your EMI amount during busy seasons

When experiencing higher cash inflow during busy seasons, consider allocating more funds towards repaying your loan. By paying extra towards your principal amount, you can significantly reduce the business loan rates burden on your business loan. 

5. Maintain constant communication with your bank

Building a good relationship with your bank right from when you submitted the business loan application. It is essential for effective loan management. Regularly communicate with your bank to understand how you can better manage your loan. 

If you find yourself struggling to make business loan repayments, inform them promptly so that they can offer suitable solutions.

Additional read: Strategies To Repay Business Loan

3 Effective tips to manage your business finances

Tip 1: Build a contingency fund to cover unexpected expenses or temporary downturns in business revenue. Having reserves can prevent defaulting on loan payments during challenging periods.

Tip 2: If you have multiple loans, prioritise repayment of high-interest debts first to minimise interest expenses over time. A business loan calculator can help you assess your borrowing capacity and determine the most suitable loan amount.Tip 3: Conduct periodic reviews of your business's financial performance to assess the feasibility of loan repayment. You can use a business loan calculator to evaluate your business finances.

Conclusion

Planning out your business finance loan repayments doesn't have to be intimidating. To manage your business loan repayments, manage cash flow, separate personal and business finances, and increase EMI amounts during busy seasons. Paying off the loan faster can save on business loan rates.If you are looking for a flexible business loan repayment, Mahindra Finance is your right choice. With Mahindra Finance, you get the lowest interest rates and also the flexibility to reply your business loan.

FAQs:

Q: What are the different kinds of business loans available in the market?

Business loans come in various forms, such as Line of Credit, Term Loans, Working Capital Loans, Short-term loans, and Equipment Financing.

Q: What are the business loan repayment tenures available?

The business loan repayment varies depending on the type of loan. It can range from 30 days to 5 years or even more.

Q: What happens when you don’t pay back a business loan?

Defaulting on a business loan can lead to legal action and confiscation of your assets. It's important to fulfil your financial obligations to avoid such consequences.

Q: How is a business loan repaid?

Paying back business loans usually offers different methods like Equal Monthly Installments (EMIs), flexible plans, bullet payments, and others. These choices let borrowers pick a plan that fits their money situation better.