In these uncertain economic times, compounded by the increase of Bank of England base rates, which have resulted in an increase of the cost of borrowing and loan repayments, there is a unprecedented pressure on all businesses to make ends meet, especially so when it comes to managing their loan repayments. The question is, how can I manage my businesses loan repayments when there simply isn’t any spare capacity in my cash flow to do so?
Many business owners have experienced sleepless nights worrying about repaying their loan, this problem which if not managed, can result in business failure. So how can you avoid this potentially disastrous situation? Surprisingly the solution is relatively straight forward. There are a number of options available to business owners like you.
Communication with the lender is key
The first and most important thing is to communicate with your lender. Advise them as soon as possible that you have a problem, ideally well before the debt debit for your loan is returned as unpaid as this is often followed by a call from your lender, which puts you on the back foot as it indicates that you are not in control of your business finances and making for spur of the moment implausible excuses. This could lead to the transfer of your loan account to your lenders business support team, this isn’t a place where you need to be and worst case this transfer can lead to recoveries action.
How you do maintain lender confidence in your business?
It is important to understand that the lender is there to help you wherever possible, they have a mandate under their terms of business to do so. Explain succinctly how the problem has arisen, which could be the after effects of the pandemic or some equally significant situation such as an unexpected loss of revenue, or perhaps a personal family matter. The lender will want to understand how long the problem is likely to last for and what you are going to do about it, all of which can represent challenges for you and the lender.
Short term cash flow resolutions for a commercial loan
One instance may be a short-term cash flow situation which can be resolved by micro managing your cash flow to meet loan repayments. If there isn’t the scope within your business to do so, then there are various other ways that can improve the situation. For example you could request a loan repayment holiday for 3 months to provide you with some breathing space to remedy matters, alternately, request that for a period of time, say 12 months, that your loan reverts to interest only payments or just capital repayments and finally ask for an extension of the loan term to make your loan repayments more affordable and in line with your businesses cash flow.
These steps will help your business survive but will also improve you relationship with your lender as they always appreciate transparency.
If you feel somewhat daunted and possibly embarrassed dealing with your lender, a specialist finance intermediary, such as Stewart Hindley & Partners can act for you to secure the best possible outcome. Get in touch with us today.
