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What happens to a Business Loan if the Business isn’t working?

Business loan has garnered rapid popularity and has made significant developments in India. As per a research, 64% of all loans disbursed in 2018 were SME loans. Despite their huge contributions, SMEs are unable to access funds for reasons like lack of credit history, inadequate financial records and more.

However, just like a coin has two sides, even a business has a profit-making and a loss-making side as every business goes through ups and downs before becoming an established one. The business performance can be a criterion when a lender signs off a loan for you. There are very high chances that you might face a downfall and incur losses even after giving you the best to make things work out. Losses can not only affect the financial side of your business but also hamper the productivity of your business.

When availing a loan, a person hardly thinks about what would happen if the business hits a rough patch and what happens to the availed business loan in this situation. The trouble begins when you have availed a business loan and the first thing that you come across is how to go ahead with the repayment of the business loan after incurring a loss? One must be aware of the consequences impacting the business loan if a business goes through a bad phase during its run.

Let’s think of the other side, the lender also faces consequences when there is a non-repayment of a business loan by a borrower. This adds on to their non-performing assets (NPAs) and turns into a loss. In such cases, the lenders assist the borrowers in repayment of business loans as much as they can by relieving some terms and conditions of the loan. This way of business loan settlements not only come as a relief to the borrower, but also is the right of borrowers imparted by the lenders for all those who default on their loans. If you have defaulted your loan, you can talk to your lender before the situation turns extreme or else the lender then unwillingly takes it ahead with the available legal procedures. In general, no lender goes the legal way on immediate basis and tries to settle it mutually & rectify the situation.

Here’s how you can deal with the EMI schedule of your business loan in case you are not able to repay –

Reschedule the date of repayment/EMI date

If you are sure that you can recover from the incurred loss soon, you can ask your lender to postpone or reschedule the business loan repayment date. The lenders don’t even charge an interest rate during the deferment period. This period of no interest is a bonus time span for you to get your business back on track and possibly arrange for funds.

Extend the tenure of repayment

Increasing or extending the repayment tenure is another possibility for managing the business loan. The extension in the repayment tenure results in reduction of EMI. Reduced EMIs are of temporary benefit as increase in the tenure also means incurring more interest payments, but the idea behind this is to refrain from shelling out high EMIs during the struggle period.

Restructuring of the business loan

You can request your lender to restructure the loan, which means changing the terms and conditions on which the loan was offered at the first instance. This restructuring may or may not be approved by the lender. The highlights of restructuring a business loan would include reduction in the interest rate, a grant of moratorium period on interest payments, etc.

Opt for one-time settlement

This is the last expedient for settling a business loan settlement post in which the lender seeks legal action for recovery of the loan. Under the one-time settlement option, you can pay off the outstanding loan amount at once, either fully or partially. On exercising this option, the loan is considered as repaid. In most of the cases, partial loan settlement is done, wherein the lender faces a financial loss.

Barring the extreme cases wherein there is a need for legal action, lenders usually accept any of the above-mentioned business loan settlement methods.

Availing a business loan from Lendingkart is straightforward as there are no hidden costs. The process of ‘getting a business loan’ is not taxing and is designed to provide fast and efficient results. Services like flexible repayments, extended loan tenure, fair interest rates and more are offered to the borrower to have a hassle-free business growth.

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