If you’ve taken out new business loans, you need to manage the money right.
Getting the money may have presented its own challenges. But now that you’ve got the cash, it’s essential to keep things in order and make payments in full and on time.
Here are 5 Tips to Keeping New Business Loans Under Control
#1. Consider Using a Separate Account for New Business Loans
Though you’ll no doubt be keeping tabs on overall balance sheets, it’s easy to lose track of which money has gone where in the course of managing a busy company.
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Keeping cash from your new business loans in a different account can help you keep track of them separately. Checking the balance will give you an ‘at a glance’ view of what’s left.
This will help you to anticipate shortfalls. For example, you might be considering making an expensive business purchase. Using the account balance and a business loan calculator, you should be able to figure out if there’s going to be a problem.
#2. Budget Properly
You need a budget for your business. Always.
Whenever you take out new business loans, you need to factor these into your budget. That means taking into account both the initial cash coming into the business and the repayments you’ll be making over the loan term.
Keep a close eye on these. Payments should always be made on time, or you could face penalty fees and charges from your lender.
#3. Overpay if Possible
If business is booming, you might consider making over payments on debt rather than plowing all the profit back into the business.
Overpaying on a large loan can potentially save you thousands of dollars in the long run. However, you might want to prioritize an equipment purchase or reward a key member of staff.
You’ll have to figure out which is best according to your business’ circumstances.
#4. Don’t Fall into the Debt Spiral
If you’re planning to take out new business loans to cover old loans you’re struggling with – stop right now.
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This is a damaging practice and could ruin your business’ credit score. But it is also a red flag meaning that something is going wrong somewhere.
You need to either look into cutting costs or increasing sales. Paying off old loans with new business loans is a spiral which can ultimately destroy your business.
If you’ve fallen into the debt spiral, the next piece of advice is just for you…
#5. Talk About Problems
If you’ve experienced a slower-than-anticipated quarter, your repayments may be in conflict with other expenses like salaries or office overheads.
In times of trouble, talk to your lender. They may be able to help you. You might be able to renegotiate the deal or even be given a few months of breathing room to sort things out.
If your company goes out of business, your lender will probably have to write off the loan – so they could be keener to help than you might think!
Hopefully, this guide has helped you build a healthy relationship with your business loans.
If you’re an entrepreneur looking for more business advice, we’ve got you covered.