Procuring MSME loans for your small- or medium-sized business has become quite easy today. For some, the challenges begin after loan approval, because the funds need to be utilized productively and thoughtfully. Below are a few suggestions to help you manage the money better.
- Keep the money in a separate account
If you have taken the loan for a specific purpose, like buying equipment or funding a specific project, the smartest idea will be to maintain a separate business account for it. If you store the funds in your primary business account, you risk overspending or spending on unplanned expenses.
- Create reminders for automatic loan repayments
One of the most important aspects of managing the SME loan is repaying it on time. If you miss the Equated Monthly Installment (EMI) payment date, you will have to pay penalties, which will hurt your credit score. The best way to make sure that you do not miss a date is to set up an auto-repayment option, allowing the dues to be automatically deducted from the account on time.
- Keep cutting costs
In an SME, you need to manage expenses effectively. You may forget about reducing expenditures once you get the loan; borrowers tend to feel too comfortable with a new source of funds at their disposal However, you must spend the loan on only specific activities for which you have taken it. Be vigilant and continue to cut down on unwanted costs.
- Do not spend unnecessarily
You should exercise complete control over how you spend the money that you receive from SME financing, otherwise you will end up exhausting the entire amount prematurely. Do not spend the money just because you have it. Plan your expenses to ensure that you don’t waste the funds unnecessarily. Consult with your accountant or financial manager to determine which expenses truly require digging into the loan amount.
- Do not hide information from your lender
This is one mistake that many business owners commit. In times of financial crisis, you might find it difficult to repay your loan instalment on time. The EMI, which comprises of the SME loan interest rates and the principal amount, may seem quite high during such tough phases. Instead of hiding anything from your lender and forcing them to send debt collectors, you should visit them proactively and inform them about your situation. They will be willing to help you and offer possible solutions.
To apply for a loan, first check whether you meet the lender’s SME loan eligibility criteria. If you fulfil these conditions, you can consider a trustworthy lender like Mahindra Finance, as it offers myriad options in Business loans.
