You’ve just received the best news ever; your business loan has been approved and processed. This is music to the ears of many cash-strapped entrepreneurs. Whether you got the loan through a traditional bank or an alternative lender, the acquired funds will go a long way in realizing your business plans.
As your mind races to grapple with what the money represents, you need to have a plan for what you intend to do with the funds. Loan approval might be the end of the loan application process, but it is the beginning of a potential prosperous and growth-oriented future. Here are five tips on what to do after the business loan hits your account.
Schedule for Business Loan Repayment
Now that your financing request has been approved and received the funds ensure that you pay it back, so you don’t put future loan approvals at risk. Diarize the loan repayments, add payments to the monthly budget, or set up automatic payments from your business account. Missing payments or even defaulting on your loan will hurt your credit rating.
As you probably found out during the application process, your credit rating plays a significant role in determining loan products availed to you, even when looking for an FHA home improvement loan. While there are products available for those with bad credit, you certainly do not want to limit the options available to you. Build your business credit score by making full payments on time with the loan you’ve just received, and you might get better rates and terms on your next business loan.
Make Arrangements for Loan Prepayment Opportunities
While getting approval for the loan, the lender may have advised you on prepayment opportunities. These could include doubling your loan payments on set dates. It could also mean making lump sum repayments on anniversaries or even repaying the loan before maturation date.
Unfortunately, some lenders will charge a penalty if you prepay because they are not receiving the interest they would have earned if the loan had run its full course. Look into this carefully, so you have a clear picture of how the business loan is structured. If your business can make a loan prepayment equal to the amount borrowed, you will likely save money on interest, while building your credit score.
Watch Your Credit Score
Once you get your business loan, make sure you check your business credit score after a few months. Some lenders do not report to business credit bureaus. However, making satisfactory loan repayments will help in improving your business credit rating.
Refinancing Debt into a Low-Cost Loan
Looking into the future, consider refinancing the business loan when you receive a short-term loan, and you’ve been making timely payments in full. You may refinance the debt into a longer-term, lower-rate loan especially when revenue increases and credit improves. In fact, an SBA loan may even be within reach.
Refinancing is a worthwhile venture with time as long as you are a responsible borrower and business owner. Also, refinancing will help lower interest rate, shaving off hundreds, if not thousands, of dollars from the loan cost.
Use Business Loan to Grow the Business
Lastly, carefully consider how you intend to spend the money borrowed. With the funds now available, use them to make your existing setup even better or produce a new product. You can use the funds to hire staff, expand into new markets or even move into larger premises.
Remember, the loan you receive is a tool to grow your business. Care for it, use it wisely, and consider it the next step to taking your business further.