6 Smart Things to Do After Getting a Business Loan
First off, congratulations on getting that much need and well-deserved funding to get your business growing! There is no doubt that countless hours went into getting this loan for the business you love, especially in tough times like these. You have the cash, but now what? Here are 7 smart actions to take to build a repayment strategy, manage your debt, stay ahead, and grow your business credit like a pro.
1. Know your repayment schedule
Not all loans have the same repayment schedule. It all really depends on the type of loan that you have. Some loans require monthly repayment, while others are weekly, biweekly, or even daily. Each of these types of repayment has its benefits, but the main detail is knowing exactly which type your business has. You will need this information to make a payment schedule and make your payments on time, so ask your loan officer for the details on your loan.
2. Set up payment reminders or auto-payments
Setting up reminders and auto-payments reduces the risk of late or missed payments. When your make auto-payments, the funds are automatically deducted from your account and applied to your loan periodically. When you set up payment reminders, they can either supplement your auto-payments, letting you know when they are occurring, or just remind you to make manual payments if you prefer to do it that way.
3. Make yourself a quick loan guide
Writing down all of the key details of your loan is a great practice in helping you remember all of the important things you need to know in order to get you loan paid off correctly. Your loan quick guide should include the following information:
Lender’s contact information
Loan term
Loan amount
Interest rate
Repayment schedule
Potential early repayment fees
When you have all of this information available at your fingertips, it’s easy to quickly pull it up if you or someone else has any questions about your loan.
4. Create an amortization schedule
Amortization refers to the repaying of your loan over its term, with regular payments to both the principle and the interest. Most types of business loans have amortization schedules. Since your lender knows exactly how much you owe and when, you should too.
What to include in your amortization schedule:
How much of the payment it toward the principal
Balance owed after the payment is made
Beginning balance
Date of payment
Scheduled payment amount
Any additional payments
How much of the payment is toward interest (in $)
Payment numbers
5. If possible, repay early
You can actually save money by repaying your loan early, as long as there are no fees associated with doing this. Repaying your loan saves your money on paying the interest, which is why you need to check carefully to make sure that the lender allows for early repayment.
Business loans tend to have quicker ROI, so you typically do not want your loan to run further than it has to. You may need additional funding in 6 months to purchase some equipment or fulfill orders.
6. Refinance
Refinancing is when you take out a new loan to repay your previous loan. This is typically done because you can find a better rate on the second loan. This can be especially beneficial if you have built your credit score to the point where you can take out a loan with a lower interest rate.
