Every business – small, medium or large – requires capital to manage or expand operations. The best way to raise capital is to apply for a Business Loan from a reputed financial institution like Kotak Mahindra Bank. Based on their eligibility, entrepreneurs can borrow unsecured Business Loans from Rs 3 Lakh to Rs 1 Crore. However, before applying for a Business loan, applicants should check a few important aspects that make a big difference to the loan cost and make the repayment manageable. While interest rates play a crucial role in determining the loan cost, the repayment tenure makes a big difference. For example – Kotak Business Loans come with a repayment tenure of up to 5 years. If you opt for a shorter tenure, the EMI amount will be higher. However, if you choose a longer tenure of 5 years, the EMI amount may seem affordable, but the interest outgo would be more.
Here, using a Business Loan EMI Calculator can be helpful. The loan calculator, a powerful tool available on the websites of leading lenders like Kotak Bank, is the key to making informed decisions about your loan. By simply entering the loan amount, interest rate, and preferred repayment tenure, you can calculate the loan EMIs. You have the flexibility to adjust all three variables to suit your needs and preferences, enabling you to determine the ideal EMI amount and apply for the loan online.
Once you’ve finalised your loan plan, the next crucial step is to strategise its repayment. Timely loan instalment payments are not just a financial obligation; they are a key factor in maintaining a good credit history. This, in turn, ensures a good credit score, which is vital for future borrowing opportunities. While there are various repayment options, choosing the right one can be a challenge.
This article will help you explore some smart strategies and choose the one that suits your situation. So, let’s check out the strategies that can help you make the repayment of your Business Loan hassle-free.
Strategies to get through Repayment Options for a Business Loan
Understanding Your Financial Situation
Before going deep into the plans of repayment, it is very important to have a good glimpse of the financial situation. Look at the financial health of your business in accordance with its cash flow, projected revenues, and debts to come up with a clear picture. The clear picture will be used in making informed decisions for the plans of repayment. The Business Loan interest rate calculator on the website of financial institutions, including Kotak Mahindra Bank, helps further understand the loan details.
Craft a Detailed Repayment Plan
Similar to personal finances, creating a structured repayment plan is fundamental when managing a loan for a business. Begin by outlining your loan obligations within your overall budget. Factor in the loan repayments as fixed expenses and ensure they align with your business’s cash flow.
Leverage Auto Debit from Account
Take advantage of the automatic payment feature offered by most financial institutions. The automatic transfer will always ensure payments leave on time and will remove the risk of failing to meet the deadlines. This will help maintain a good credit history and allow you to easily manage your finances to take care of growing your business.
Prioritise Repayments Strategically
If your business has multiple loans or debts, strategically prioritise repayment. Begin with loans carrying higher interest rates as they tend to accumulate more interest over time. Allocating extra funds towards these high-interest debts accelerates repayment, ultimately reducing the financial burden.
Utilise Unexpected Financial Gains for Extra Payments
Any surplus funds from increased revenue, bonuses, or unexpected windfalls, can be strategically channelled into loan repayments. Making additional payments, even if they are incremental, helps decrease the principal amount, shortening the repayment period and lowering total interest.
Open Channels of Communication
In the case of business, unforeseen challenges can arise. If something makes it difficult to repay the loan, proactively communicate it to your financial institution. Explaining your situation might lead to modified repayment plans or alternate solutions, preventing penalties and maintaining goodwill.
Financial Responsibility
Managing Business Loan repayments requires diligent financial responsibility and strategic planning. By crafting a clear repayment strategy, leveraging auto debit from the account, prioritising repayments strategically, utilising unexpected financial gains for extra payments, and fostering open communication with financial institutions, you can effectively understand the complexities of Business Loan repayment.
Conclusion
Successfully managing loan repayments is pivotal for your business’s financial stability and growth. These smart strategies ensure timely repayments and set the groundwork for a financially secure future. Remember, proactive financial management is key to getting diverse repayment options for your Business Loan.
Understanding the eligibility criteria is crucial for prospective borrowers preparing to apply for a Business Loan. If such criteria are met, then your eligibility criteria for loan approval also increase, thereby reflecting a positive light on the stability and financial health of the business.
