As small business accountants, we see many businesses take out loans to help them fund new initiatives, grow their operations, improve cash flow, and more. Taking out loans can be a viable business strategy when done properly, but as your accountants, we have some tips to help you effectively manage the loans your operation takes out.
• Keep an Eye on Your Credit Score – If you ever need to negotiate debts with your lender, having a good credit score can put you in a better position. Depending on your goals, having a higher credit rating can help you work out a deal that lets you reduce minimum repayments or pay off the loan faster.
• Steer Clear of New Debt – Before your business takes on any new debt, talk to your lender and your accountant. If you start having trouble with repayments, look for ways to increase sales or cut back on costs.
• Make Bigger Payments When Possible – Seasonality has an impact on many industries, and chances are this holds true for your business. During your busy periods when sales increase, for example, try paying down more of your debt by increasing the amount you put towards minimum repayments.
• Talk to Your Lender – If your business forecasts financial hardship or your operation experiences unforeseen difficulties, talk to your lender. Do this before you miss your next payment and see if you are eligible for an interest rate reduction, a short-term delay of payments, or an extension of your loan term.