It is wonderful to know that your application has been approved. The next step is to master the management of the loan so that you maintain your good credit rating and ensure that lenders will be happy to provide further finance in the future.
One of the most important parts to clever finance management is to go through the contract with a fine tooth-comb and make sure you understand all the terms and obligations.
It is really important to engage the services of a commercial lawyer if you are about to enter into an equity deal or borrow a large amount of money. These types of contracts are often lengthy and use words and clauses that the average person will battle to understand. Before you sign any contract you must make sure that you know exactly what your obligations are as well as how the contract impacts on the lender.
Once the contract is signed you need to make communication a top priority. Internally, you’ll have to communicate with your accounts person so that they understand the monthly repayment system and the terms that govern how the finance becomes available and any restrictions of how it can be spent.
External communication is equally important so that you know the lender’s appointed contact person and can keep them informed of your progress. Building a good relationship with the lender and proving that you are trustworthy and someone who takes their business, and its contracts, seriously is a huge benefit during difficult times. For example, if you have met all the terms of the contract and you have a good relationship with the lender, they will be significantly more willing to work with you should the business hit a temporary hitch and be unable to pay the repayments on time.
Lenders and seasoned business people know that things do not always go perfectly well all of the time. You might need to skip, or make a late payment, or exceed your limit on the odd occasion. In instances such as this good communication is vital. Don’t wait until after the payment date to discuss the issues, deal with them as soon as you become aware that the business may default.
Prepare documents to show that the problem is only temporary and will soon be cleared and show these to the lender – you will be pleasantly surprised how helpful people will be once they understand what the issues are and that, in the long run, there isn’t a danger of them losing their money.
Cash flow statements are an excellent way of monitoring the inflow and outflow of cash from your business and provide you with an early warning system to predict if the business will experience financial difficulties.
At the first hint of trouble, it is a good idea to contact the lender with the details and a plan for catching up.
So keep in touch regularly with your lender, and tell them how you are doing – are you making progress, or do you need help?
If you have experienced problems with repaying the loan but these were communicated to the lender and a compromise solution was found, you need to check that the delayed payments have not impacted on your business and personal credit rating. So discuss this with your lender to make sure that the temporary glitch that is preventing you from repaying the loan isn’t reported negatively to the credit bureaus.
At least once a year, you should review your “standing” credit deals and try to renegotiate limits, fees and interest rates. This is especially important for overdrafts, factoring deals, revolving credit and supplier accounts.
Business owners are often required to sign personal sureties when they raise finance. If you signed personal surety for the loan, then hopefully the duration of the surety is linked to the loan. Either way, once you have repaid the loan, make sure that you cancel ANY personal sureties related to that loan.
If you are experiencing problems with cancelling personal sureties, then involve a lawyer or contact the manager of the lender’s organisation. Personal sureties that do not have a fixed duration are extremely dangerous.
Finfind provides its services free of charge to businesses seeking finance. Our primary purpose is to link SMEs with all the relevant finance providers and finance products that match their funding needs. As a matching service we are not required to be a registered finance provider as we do not loan money directly.