A business loan is a financing solution that most companies acquire for further growth. It’s all about borrowing money from the bank to fund business-related expenses like expansion and purchasing equipment. Aside from bank loans, other types of loans include invoice financing, cash flow loans, business cash advances, and microloans.
If your business loan application is successful and you’ve already received the funds, here are the steps that you should take after approval:
- Plan for Loan Repayment
You will need to pay your debt to the bank with interest, so it’s best to have a solid plan for repayment. Make sure to prioritize this by adding the amount to your monthly budget. Be responsible with the monthly deadline by setting up your business’ account to automatically recompense the bank to ensure timely payment.
An excellent way to fund your repayment is to be adept at trading and investing. Reliable online resources like Learn to Trade teaches entrepreneurs on how to do Forex trading, which involves buying and selling currencies from the foreign exchange market.
- Be Mindful of Your Business Credit Score
Prompt payment of your loans can lead to your business getting an outstanding credit score and record. The rating is crucial for your enterprise’s growth since having an exemplary credit score will drive more companies to want to work with you. This gives you more freedom to choose who to partner with.
Moreover, it is more likely that your future credit or business loan applications will be approved with lower interest rates since you’ve proven yourself to be a trustworthy client. Some ways to improve credit scores include saying goodbye to extra credit cards, merging multiple debts, and asking the bank to decrease your credit card limit.
- Consider a Chance for Loan Prepayment
Loan prepayment is the partial or full repayment of the debt by a borrower earlier than the expected duration. You could do this by paying double on your monthly deadline if the status of your cash inflow allows, remitting the lump sum on your debt’s anniversary, or settling the balance before the maturation date of your business loan.
The advantages of prepayment include:
- Save on Interest – Paying back the money you owe as soon as you can saves you from high interest rates. Banks take into consideration how long you’ll take in repaying your loan and would incorporate the appropriate fees.If you structure your finances into prioritizing the repayment and complete it before the maturation date, you won’t have to pay the interest of the succeeding months.
- Favorable Credit Rating – Aside from saving a substantial amount on interest, you also prove that you’re a dependable entrepreneur. Paying your debts on time is a valuable skill that will open up more financing opportunities for your business.
- Have Peace of Mind – Ultimately, by having a prepayment plan and finishing off your loan repayment as early as possible, you free yourself from worrying about your business’ liabilities. This way, you can focus more on strategies to increase your sales and profits.
Take note, though, that some banks charge fines for prepaying since they won’t be earning from interest.
Nonetheless, there are financial institutions that allow for loan prepayment up to a specified amount, so you should check how your loan is structured. Afterward, you ought to assess whether this method is more cost-effective than permitting the credit to run its full duration.
- Think about Refinancing
If this is the first time you applied for a business loan, it is to be expected that you didn’t get the optimal rates and terms since lenders still have to evaluate your reliability as a borrower. However, once you’ve established yourself as a dependable client through prompt payments, you may be eligible for refinancing.
This allows you to obtain new terms of agreement from your lender with revisions to the initial interest rate, remittance schedule, and payment structure. Know the goals you want to achieve through restructuring such as reducing monthly payments, decreasing the annual percentage rate (APR), and to give allowance for additional loans.
- Monitor How You’re Spending the Loan
Be mindful of where you’re allocating the money you borrowed. Are you using the funds to support your business operations through hiring more employees or purchase equipment and additional stocks for your inventory?
Don’t waste your loan on things that are not bringing in more cash into your coffers because you might not be able to pay your debt on time.
Be wise in handling the financial aspect of your business. Think of loans as a tool that can facilitate the growth of your venture. Make sure that you invest the money in products, services, or processes that will secure your business’ future.