As a business owner, availing of a loan can be a necessary step to finance your company’s growth and expansion. However, it’s important to remember that with any loan comes the responsibility of repayment. Paying off a commercial loan can be daunting for any business owner. However, with the right strategies in place, it is possible to successfully repay your loan and improve the financial health of your business.
In Australia, commercial loan repayment is regulated by the National Consumer Credit Protection Act (NCCP). This Act outlines the legal obligations of businesses taking out a commercial loan, as well as the rights of lenders. For business owners, understanding their legal obligations is essential, as failure to make repayments on time can result in legal action.
If you’re wondering how to repay your commercial loan in Australia, this guide is here to help.
- Understand your repayment terms
Before you even take out a commercial loan, you must fully understand the repayment terms. This includes the interest rate, repayment frequency, and any fees or charges associated with the loan. By understanding these terms upfront, you can ensure that you have a clear plan for how to repay the loan and avoid surprises down the road.
2. Create a budget
Once you clearly understand your repayment terms, it’s time to create a budget. This will help determine how much you can realistically afford to pay towards your loan each month. Your budget should consider your business’s income and expenses, as well as any other financial commitments you may have.
3. Make regular payments
One of the most important things you can do to repay your commercial loan is to make regular payments. This includes paying at least the minimum amount due each month and any additional payments you can afford. By making regular payments, you can avoid falling behind on your loan and potentially incurring late fees or damaging your credit score.
4. Consider refinancing
If you’re struggling to make your loan payments or think you could get a better interest rate elsewhere, refinancing may be an option to consider. Refinancing allows you to take out a new loan to pay off your existing commercial loan, potentially at a lower interest rate. However, it’s important to carefully weigh the pros and cons before deciding to refinance, as it may not always be the best option.
5. Communicate with your lender
If you’re having trouble making your loan payments, it’s important to communicate with your lender as soon as possible. They can work with you to come up with a payment plan or modify the terms of your loan to make it more manageable. By keeping an open line of communication with your lender, you can avoid falling behind on your payments and potentially damaging your credit score.
6. Explore government programs
If you’re struggling to repay your commercial loan due to circumstances beyond your control, such as the impact of COVID-19 on your business. In that case, you can explore government programs for assistance. For example, the Australian government’s Coronavirus Small and Medium Enterprises Guarantee Scheme provides guaranteed loans to eligible small and medium businesses to help them through the COVID-19 pandemic.
7. Seek assistance from commercial finance brokers
Commercial finance brokers specialize in helping businesses secure the financing they need to grow and thrive. They can also be a valuable resource for repaying your commercial loan. They can help you compare lenders and loan products to find the best fit for your business, and may be able to negotiate better terms on your behalf.
According to the Australian Securities and Investments Commission, small businesses in Australia are responsible for around 44% of all commercial loan debt in the country. This highlights the importance of properly managing commercial loan repayments, as it can significantly impact the overall financial health of your business. By following these tips and seeking financial advice when needed, you can effectively repay your commercial loan and ensure that your business remains on a strong financial footing.