The success of your business is not guaranteed. Even after you put in your best efforts, your business might hit a rough patch and incur losses. These losses are not only financially draining they also hamper the productivity of your business. Moreover, if you have availed funds for financing your business, repaying the business loan becomes a challenge. Do you know what happens to your business loan when your business is not performing well?
Non-repayment of the business loan is a nightmare for the lenders too. It can add to their non-performing assets (NPAs) and cause a loss if the borrower is unable to pay the loan. That is why lenders often help borrowers to repay their loans as much as possible by relieving some terms and conditions of the loan. These reliefs are also the right of borrowers who default on their loans. Here’s how you can deal with your business loan if you are not being able to repay –
• Postpone the repayment date
If you believe that your business has hit a rough patch from which it would recover in the near future, you can ask your lender to postpone the loan repayment date. During the deferment period, when repayment of the business loan is not being done, lenders don’t even charge an interest rate. This gives you some time to make your business work and arrange for funds.
• Increase the repayment tenure
Another possibility for managing the business loan is to increase the repayment tenure of the loan. When the repayment tenure is increased, your EMIs reduce. As such, paying such reduced EMIs might become possible for your business which is facing a financial crisis. Though increasing the tenure would incur more interest payments, you wouldn’t have to shell out high EMIs from your already struggling business.
• Get the loan restructured
Restructuring of the loan means changing the terms and conditions on which the loan was originally offered. You can request your lender to restructure the loan which might or might not be approved by the lender. Restructuring would include reducing the interest rate, granting of a moratorium period on interest payments, etc. If the loan is restructured, repayment would become easier and you might be able to pay off the loan.
• Make a one-time settlement of the loan
One-time settlement of the business loan is the last resort after which the lender seeks legal action for the recovery of the loan. Under the one-time settlement option, you pay off the outstanding loan amount at once either fully or partially. After the option is exercised, the business loan is considered to be repaid. If a partial loan settlement is done, which is usually the case, the lender faces a financial loss.
Though lenders have legal recourse to recover their business loans, such an option is exercised only in the most extreme of cases. In other cases, lenders approve either of the above-mentioned options and look for repayment of the loan. Even if your business is not working, you can resort to any of the above-mentioned ways and pay off the business loan which you have availed.