6 Methods to Repay Your Business Loan Faster

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Are you worried about how to repay business loans fast and the thought is weighing you down? If yes, then this article is for you. 

The article will discuss the top 6 methods you can use to repay business loans faster that will also enhance your business’s creditworthiness and reputation. 

How to Repay Business Loan Faster in 6 Steps?

1. Make Part-Payments:

Rather than paying business loan EMI once a month, you can use any extra income you get to pay off your debt faster. The lender will charge you a fee for this, but it would certainly help you repay your loan faster.

Please note that this option is usually only available for secured loans. If you have an unsecured business loan, speak with your lender to understand the terms for part payments.

2. Increase your EMI Percentage at Regular Intervals:

If you think you can manage it by cutting your expenses or increasing your income, you can speak to your lender and increase the EMI payment by a certain percentage. Again, the feasibility of this solution will completely depend on your lender’s policies as well as the type of business loan you have taken.

The advantage here is that you will be able to repay the business loan quicker. Use the business loan EMI calculator to plan your EMI amount and tenure conveniently.

3. Consider Refinancing your Business Loan:

If you can find a better deal and low business loan interest rates from another financial institution, you can consider applying for a balance transfer of your business loan. However, before going for refinancing, always check the feasibility or the total benefits you will get to refinance your existing business loan. Most lenders allow borrowers to foreclose a loan only after a certain number of EMIs have been paid, and may even charge a fee on the outstanding principal amount. Moreover, the new lender will charge you processing and administration fees - it would be wise to take into account the total cost before opting for the balance transfer.

Must Read: How to Apply for a Business Loan Online?

4. Set up Autopay for Business Loan EMI Payments:

The autopay feature will not help you directly to repay business loans faster, but it ensures you never miss on the EMI payments, thus saving you from penalties.

Also, some financial institutions offer a discount on interest rates, when you pay through the autopay feature.

5. Establish a Good Working Relationship with the Lender:

It is the most undervalued point in the banking industry and borrowers often ignore establishing a good working relationship with the lender.

The process to establish a good working relationship with the lender involves repaying all EMIs on time and communicating on a regular basis. It helps to increase your credibility and improves the chances of getting good terms on the loan. Also, the lender helps you with taking advantage of different discount offers that may be available from time to time.

6. Be Prudent while Borrowing:

Don’t overborrow, as it will impact your repayment schedule and if not managed properly or you default on the repayments, it can lead to long term repercussions.

Therefore, it is essential to borrow the amount that you can repay easily without hurting your business cash flows much. Also, during repayments, avoid unnecessary escalation of operating costs that can impact your repayment capacity. Optimize your resources and constantly work on early repayment of the business loan.

Things to Note

  • Closing on your business loan early definitely boosts your confidence and you can focus more on driving the growth of your business. But, before considering early repayments, do the maths and evaluate the pros and cons.
  • Take into account the rules, as well as foreclosure charges or prepayment penalties. If there are any, negotiate with the lender for possibilities of early business repayment. 
  • Also, the quest for early repayment should not result in a cash flow crunch for your business, or lead to taking another loan to meet the shortfall.
Must Read: 10 Most Profitable Wholesale Business Ideas in India

Tips for Negotiating Best Deal on the Business Loan

  1. Apply for a Business Loan Online: It’s not only convenient and saves your precious time, but you can also compare and choose the best business loan offered by different lenders.
  2. Meet all the Eligibility Criteria: To get the best business loan deal, you should meet all the eligibility criteria required by the lender. Provide all the necessary documents for a business loan.
  3. Assess your Creditworthiness: Before applying for a business loan, assess the company’s as well as your credit score. If you need an unsecured business loan and the credit scores are lower than 750, then take steps to improve the score first to get loan approval and low business loan interest rates.
  4. Analyse Business Cash Flow: The status of your business cash flow greatly impacts the chances of business loan approval. If your business has a history of strong cash flows, then it is easier to get favourable terms on the business loan. In case of irregular or low cash flow of your business, you may be charged a higher interest rate on the loan or your application can also get rejected.  

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