Finding and receiving approval for your first affordable small business loan is an important step for any small business, but it’s simply the first of many toward achieving your long-term goals. While you have already outlined your ideas for the money in your business plan, things aren’t always as easy as anticipated.
What you do with your first business loan can have a major impact on your company’s outlook and your ability to receive money in the future. These are some of the most important things to consider to set yourself up for success.
Failing to pay back your first business loan on time can seriously reduce your chances of being approved for loans in the future, and it can be easy to fall behind on those payments quickly.
It’s important to add monthly payments into your company’s budget, or set up automatic payments to ensure you don’t forget. Even a single missed payment can have a significant impact on your business’ credit score.
Depending on the terms of your loan, you may be able to take advantage of prepayment opportunities in order to finish paying off the balance in advance of the maturation date.
If you do choose this option, it’s important to remember that some lenders charge a prepayment penalty to make up for the lost interest resulting from early payments. Be sure to check the specific terms of your loan in order to make informed decisions.
Many business owners aren’t aware of the importance of their business credit score, but many lenders report repayment details to credit bureaus. Missing payments or falling behind can significantly hurt your company’s credit score.
With a reduced credit score, you’ll have trouble finding favorable loan terms in the future. To achieve the best possible score, you may actually need to send your payments before their due dates.
Depending on your company’s circumstances and the terms of your original loan, you may be able to benefit from refinancing your debt into a long-term loan at a lower rate. This is especially likely if you’ve been able to increase your revenue or improve your business’s credit.
Refinancing can save your company thousands of dollars over time, especially if you’ve taken out a large loan or are paying a higher interest rate. Look into different refinancing options to see if one would be a good fit for your business.
Signing up for a business loan is a great way to make yourself a target for telemarketers, loan brokers, and other lenders. Any collateral you put up for a lender is public information they can use to contact you for additional loans.
Fortunately, it’s easy to register your business or personal phone number using the National Do Not Call Registry. After waiting about a month for processing, you should no longer receive any telemarketing calls on any number you registered.
While each of the above strategies is an effective way to put your business in a better position after receiving its first loan, the single best thing you can do for your company is to simply use that money to its fullest potential.
New funds open up a wide range of opportunities for small businesses, including everything from website and app design to new hires and product development. The decisions you make in the early stages of growth can have a significant impact on your company’s future and your ability to receive approval for loans later on.
Even if you had a clear idea of what you needed the loan for, that doesn’t mean you have to follow everything on your business plan to a T. If new opportunities come up or you find different uses for the money, don’t hesitate to adapt and try to do more with your loan.
If you’re having trouble determining the best ways to reinvest in your small business, consider reaching out to other small business owners in your area. There are a variety of small business networks available to facilitate connections and put you in touch with people who have relevant experience.
Owning a small business is often an overwhelming, tiring, and incredibly difficult endeavor, but it can also be extremely rewarding and lucrative. A business loan is a major step in the right direction, and these tips will help you leverage that opportunity and make the best decisions for your company.