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Tata Capital > Blog > Loan for Business > All You Need to Know About Business Loan Repayments

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All You Need to Know About Business Loan Repayments

All You Need to Know About Business Loan Repayments

As a business owner, you know how business loanshave benefits manifold. Whether your business is faced with a cash flow crunch or you want quick funds to get your organisation out of a financial bind, business finance can help.

However, equally important is repaying your loan on time. Here’s a guide to business finance repayment.

Do a financial assessment

Conducting a thorough financial assessment of your business expenditure tops the list of things you need to do for timely repaying your loan. By evaluating your company’s finances, you can determine your spending budget and how much legroom you must have to repay the monthly EMI in full, considering additional expenses.

Check interest rates on loans

The overall loan amount you’ll repay is based on the rate of interest charged on your loan. Your business loan interest rates depend on the following factors-

  • Whether you are a mid-sized or large company, you need a clean track record of taking credit and repaying it on time for years to qualify for better loan rates.
  • Since a healthy CIBIL or credit score represents strong repayment capability, you’re considered a low-risk borrower and receive more affordable loan rates.
  • Another crucial factor impacting your rate of interest is your annual business turnover. Here, the higher your turnover, the more competitive interest rates you’ll bag, hence lowering your repayment amount.

Additional Read: The Pros and Cons of Business Loan Refinancing

Be prudent about borrowing

Getting the right loan amount is key to successfully funding your business need and timely repaying the loan. To determine how much funds you can comfortably repay, create costs projections detailing the usage of the borrowed amount.

Besides that, prepare P/L and cash flow statements and financial projections to roughly calculate business loan repayment costs, estimate your expected revenue after taking the loan, and additional expenses.

Manage cash flow

When you apply for a loan for your business, carefully understand the impact of the repayment schedule on your cash flow and keep track of your monthly expenses. This way, your monthly instalments don’t negatively affect your monthly cash flow cycles.

Failing to do so might result in your monthly expenditure exceeding your budget. As a result, you may not be able to repay your EMI timely.

Additional Read: What is a Business Line of Credit & How Does it Work?

Pay more EMI during a busy season

Another crucial factor for successful business loan repayment is making partial or biweekly payments whenever possible. When you pay extra in partial instalments during peak season or a profitable period, your principal amount reduces with each payment, and you pay lesser interest than before. 

To sum it up

Like a lender checks your business loan eligibility, you must weigh their policies before taking a loan. Select a lender that offers the flexibility to make additional, early payments within a month.

If you’re looking for unique multi-function business financing solutions, turn to Tata Capital. We extend collateral-free funds at minimal documentation requirements. With us, you can customize your loan repayment and opt for a suitable EMI plan.

Use our business loan EMI calculator to formulate the perfect loan plan for your business and apply today.

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