How to Pay Back your Small Business Loan Faster

Getting approval for a loan is an exciting venture for you and your business. Whether it’s a long or short-term business loan or one acquired from a direct lender, being approved means your business’s finances are strong and allows more opportunity to meet overall business objectives.

Constantly meeting a monthly loan payment is just plain, good business. Paying it off in a shorter period of time is even better. While the latter may not seem to be a choice for many businesses, options are available to alleviate that monthly payment well before the end of its term. According to thinkingcapitol.ca, here are just a few ways to do just that.

Make More Frequent Payments

All lenders have different terms and conditions. If a bi-monthly payment option is available, consider it. The long-term benefits far outweigh the added responsibility of meeting a payment twice a month. On thinkingcapitol.ca’s website, it explains a bi-monthly payment plan means making the equivalent of “13 payments rather than 12 monthly payments.” This means that a five-year business loan can be paid approximately five months before its due. Bi-monthly payment terms can also potentially reduce the amount of interest paid over a year (depending on how the interest is applied to the loan), meaning more of the funds are applied to the loan.

Plan for a Few Extra Payments

This may all depend on your business finances and cash flow. However, if new contracts were achieved, or your business is experiencing increased profits, consider making a few extra payments – whether it’s for a short-term business loan or not. By putting down a few extra funds on the monthly payment or more significant ones every quarter, say on a five-year loan, you just might be able to settle your loan a lot faster.

Increase the payment amount monthly

There are also methods of “whittling away” your business loan and this is one of them. If you can’t add large, lump sums throughout the year, contributing more than the payment amount month-to-month is better than just paying the regular amount. It also means you can reduce the interest over the whole term of the loan, and even reduce the principal a little faster.

These are just a few ways of paying back your business loan more quickly. It’s always suggested to speak with your lender about other options. According to Access Commercial Finance, paying back a small business loan offers many benefits. These include keeping a positive credit score and having the ability to reinvest earnings into your business with one less important payment to meet monthly.