Top Tips to Reduce Your Business Loan Repayments
If you are a small business owner who’s taken out a small business loan, this article is for you.
A small business loan typically serves as a finance solution to achieve certain business goals, but ensuring your loan is paid back in full can be difficult, and you may need help.
We’ve listed some tips to help small businesses reduce business loan repayments and help them pay them off faster.
Prioritise Having a Good Credit Score
One good way to potentially reduce business loan repayments is by focusing on achieving a good credit score.
Having good credit typically gives you access to better finance solutions and can make it easier to pay your loan on time.
Your credit score is also typically used as an indicator if your business is finance savvy, meaning potential moneylenders will be more willing to give you more favourable terms in the long run.
Small business money lenders may also be more amenable to changing the terms of your loan if your credit score is better and you’ve been making regular payments.
A strong credit profile in the business landscape can result in better loan terms, a reduced interest rate, and easier credit or loan repayment, which can help you access more business loans and possibly lead to business growth.
Stay On Top of Your Cash Flow
Another way to reduce business loan repayments quickly is by closely monitoring your cash flow. Keep track of how much you’ve already paid and where the rest of your cash is going.
Keeping a firm grip on your financial status will give you a better idea of where your money is going, whether that’s repaying small business loans or other expenditures.
Changing your repayments could improve cash flow or help you pay your small business loan faster. Build an extra cash reserve to cushion against unexpected expenses and possibly save yourself from any future issues.
You can also try to stay up-to-date on your invoicing. The sooner you invoice, the sooner you’ll get paid.
You may also want to try and save a healthy cash reserve. It can further help you stay on top of your cash flow.
By maintaining a steady cash flow, you guarantee your capacity to manage financial obligations. This can also help your small business grow more quickly and possibly enable you to manage future cash flow concerns more smoothly.
Be Strategic When Choosing A Lender
You can possibly make repaying your loan easier by being strategic with your moneylender of choice. When looking for a lender, you should always check if they offer flexible repayment options.
Your chosen lender can greatly influence your loan’s terms and overall conditions. For example, more flexible loans may have more favourable repayment options or schedules.
They could also offer you lower interest charges to potentially make your small business loan repayments easier. With the right moneylender, you can make your financial arrangement more manageable.
Some moneylenders may even offer business loans that do not have early payment penalties, meaning you can pay them as soon as you have enough money.
With Lumi’s Small Business Loan, for example, you could even drop your interest every month as you pay off your loan with our newly launched Rate Ease* benefit. Designed to reward eligible clients who pay on time, this benefit will see your interest rate drop for up to 12 months, saving you up to 11% on total interest charges.
Pay More When Business Picks Up
Another method to reduce business loan repayments is to pay more during peak seasons.
This proactive approach can help reduce your small business loan’s outstanding debt and potentially save you from paying more money in interest fees.
Paying more during busier seasons can help make small business loan repayments easier for your company because it ensures the debt can be cleared faster.
If your company is expecting a large amount of money coming in due to higher seasonal demand, you may want to consider using this to pay for your loan.
Consider Refinancing
If you want to reduce business loan repayments and are open with your lender, you could consider refinancing to possibly help you repay the loan.
Your lender may be willing to let you make your small business loan repayments at lower interest rates than the original plan. Paying this back may be easier on your finances.
When you refinance, you’ll take out a new loan at more approachable rates, which can be easier to pay back.
When you refinance, it may help you manage your cash flow better and optimise your payment schedule.
NOTE: If you have concluded that taking out a new loan is the best course of action, you can consider applying for small business loans from alternative lenders like Lumi.
Get Government Assistance
You may also approach the government for aid to reduce business loan repayments to potentially secure the cash to repay your loans.
You can find valuable resources and relief through government support programs.
The government, at various levels, provides a range of initiatives designed to support small businesses through financial challenges and economic fluctuations.
These programs encompass grants, subsidies, tax incentives, and other forms of financial assistance, which can help you pay off a loan, avoiding any debt or issues in the long run.
FAQs
Learn more about how to reduce business loan repayments here.
Is Interest on a Business Loan Tax Deductible?
Yes, it is generally tax-deductible, provided it is used for business purposes. Manage your finances carefully and keep a comprehensive record to ensure your claims are accurate and up-to-date.
However, specific rules and conditions may apply, so you may want to consider consulting a tax professional or the Australian Taxation Office (ATO) for more precise tips.
What if You Don’t Make Your Small Business Loan Repayments?
Failure to pay your business loan can typically carry serious consequences, including late fees or payments, penalties, and damage to your credit rating.
Additionally, the moneylender may take legal action to recover the debt or expenses, which could lead to asset seizure as payments or bankruptcy in extreme cases.
Communicating with your lender is crucial if you need time to explore potential finance solutions. Or renegotiate business loan payment terms.
Conclusion
With the tips in this guide, you’re better equipped to reduce business loan repayments and stay on top of your repayment schedule.
Prioritise managing your credit and cash flow, selecting a reputable lender, and exploring government assistance to make small business loan repayments more manageable.
You can also consider paying more when your small business experiences an upswing. The tips listed above can help save you money in the long run by paying off your business loan faster.
*Terms & Conditions and Credit Criteria apply.
