For a small business owner, getting access to new cash can lead to endless possibilities. When a small business loan is received, it will need to be applied in an organized manner, and returns should be used to repay it on time. In this next phase, here are five things that you should do after you received your first business loan. No matter it is a working capital loan or a revolving credit line, these steps will help you stay organized.
- Make a Repayment plan – We know you have just received your loan and are thinking on its best case use, but planning on how to pay them is equally important. Adding the interest or repayment amount to a monthly budget straight away can help make your credit score better. Because your credit score can be of future benefits, paying regularly will be of benefit even if you skip a payment later.
- Assess Prepayment Opportunities – There is a big possibility that you become successful and are in a position to repay the small business loan, or working capital loan you secured on time. However, please refer to your loan terms and analyze if there are any prepayment penalties attached to this. Still, repaying before time can increase confidence in your business, and lead to future growth. A lender will trust you with a bigger sum in the future.
- Track Your Credit Score – A credit score isn’t necessarily aligned with your repayment of loans. It involves your overall ability to student loans, credit card debt, or mortgages. Lenders may provide your data to credit bureaus such as Equifax and Experian who will provide business credit rankings. Keep an eye on these fluctuations after securing your small business funding.
- Look for Potential Refinancing Options – Down the line, you may wish to secure a different loan, refinance the existing one, or renegotiate the terms. This can only happen if the lender has confidence in your ability to continue as a business. Use your existing loan to your benefit, and ensure you don’t skip any payments that may make future conditions harder.
- Look for Growth – The last important point is to spend wisely. Know what kind of loan is best for you, and seek advice from your lender if needed. If your business plan requires a constant injection of cash to honor payments, seek a business line of credit in the future. If you wish to seek contractual payments, seek a working capital loan. Additionally, if you have a brilliant idea that needs a guaranteed cash injection and taxation benefits, seek a Small Business Administration (SBA) Loan. The whole idea is to be aware of your needs after your first loan is secured and you move to the next phase of sustainable growth.
Repayment is a vital component of any loan. If they are not paid on time, a business may be required to declare bankruptcy or potential default. How you manage this balance will show how competent leader you are.