You’ve finally acquired your first business loan. This is an exciting time! Now that you have the funding for your small business, it’s time to grow your business and begin acting on your bigger plans.
Not sure what that should involve? After getting your first business loan, it’s important to take certain key steps. They include the following:
Create a Repayment Plan
Don’t accept a loan without having a plan for paying it back. If you default on a loan, other lenders will be less likely to work with you in the future, and you could potentially find yourself in dire financial straits.
Avoid this by establishing a clear and specific plan for paying back your loan within a reasonable timeframe. Depending on who provided the loan, you may be able to automate installment payments, ensuring you never forget to make one.
Find Out if Prepayment Options Are Available
The amount of time you have to pay back a loan can vary on a case-by-case basis. That said, there are instances when you can “prepay,” or pay back what you owe earlier than expected.
This is obviously an option you may want to take advantage of. Paying off a loan sooner rather than later ensures you won’t have to worry about it longer than necessary.
However, it’s important to understand that some lenders don’t allow for prepayment, or impose penalties for it. That’s because paying back a loan early can prevent them from collecting interest. This is a factor to keep in mind when considering your loan options.
Pay Attention to Your Debt
The way in which failure to repay debts impacts your business will vary depending on which EU country your business is located in. For instance, in Spain, you may end up on a blacklist if you default on a loan. This will make it difficult to acquire additional loans in the future.
Find out how your particular country tracks debt repayment, and monitor where you stand consistently. It’s important to ensure you’re not harming your potential for future growth because you’re not paying back a loan in a timely manner.
If you notice you’ve been added to a blacklist (or incurred any similar penalty), find out why, and take steps to correct the situation. Perhaps you mistakenly thought you automated your repayment plan, and have thus not been paying back a loan according to the agreed upon schedule.
Make a Plan
You need to spend money to make money. This phrase is used so frequently because it’s true.
That said, it’s not entirely complete. You need to spend money wisely to make money. For example, if you used a loan to hire new employees for a department that doesn’t need them, you’re not taking full advantage of it.
You may already have a plan for how you’ll spend these funds. If you don’t, be thorough when creating one. It’s important to carefully identify the smartest possible way to use your first business loan.
Predict Future Needs
Don’t assume this current loan will cover all your future expenses. You don’t want to use all your funds only to discover you no longer have enough money to continue growing your company.
Review your financials to determine when you may need to apply for another loan or seek an additional funding source. Doing so will help you avoid unnecessary stagnation when your current funds run out.
Consider Other Options
It’s worth researching alternative funding options when planning for your future needs. Sometimes a typical business loan isn’t always ideal. Perhaps you’re better off working with an Angel Investor. Along with funding, they can provide mentorship, actively helping you succeed.
The EU also provides help if you’re struggling to convince other lenders to fund your business. For example, the COSME programme often guarantees portions of a loan for lenders. This limits their risk, giving them more incentive to offer loans. Such a programme might help you secure additional funding. The EU also maintains a list of loan opportunities for business owners. You can search the list by country to find opportunities in your region.
Most importantly, continue doing your best to grow a successful business. Someone has taken a chance on your idea by providing this loan. Demonstrate it was worth the risk, and you’ll find it’s much easier to continue funding your business over the years.