Many business owners encounter cash flow issues. As a result, they take out business loans to manage several expenses. However, when looking for finance, you need to consider how the loan is going to be paid back and if the business has sufficient profits to do this. It can lead to disasters if a business cannot make repayments timely. So, they think to decrease the repay amount to handle all the costs with ease. Many business professionals with increased cash flow wonder how to increase the repayment amount to return the loan quickly and save some money.
But as a business owner, when you take out a quick loan for business, the above depends on your loan agreement. It means the agreement determines whether you can increase or decrease the repayment amount or not. Therefore, when you face cashflow or cash shortage issues and think of reducing the monthly loan payment to free up some capital, you need to look at your loan terms and conditions to verify whether you can lower it or not.
Besides the above, if you wish to change the repayments, look for reputed small business loan lenders. It is necessary as you will locate many lenders who offer flexibility in loan terms. It means you can change your loan repayments and pay a few monthly installments over a longer term.
In many cases, you can change the repayments anytime during the loan. For this, you need to go to your lender and request the same. Sometimes the lenders will agree as they will gain more profit if you make repayments over a longer time. It is so because when you pay money for several months or years, you have to pay more interest over the term. After requesting a change from your lender, they will read your loan conditions and current income statement and decide whether you are eligible for the change or not.
The modes of loan repayment
Irrespective of whether your lender approves the loan repayment adjustments or not, you should learn a bit about various loan repayment modes. Learning these will help you when your lender agrees to give you the repayment option.
Standing Instruction or SI
In standing instructions, you as a borrower can authorize the lender to access your account to withdraw the repayment via direct debit. In this repayment mode, you can specify the withdrawal date. But in this, you need to ensure that your account has sufficient funds to avoid payment failure.
In this repayment mode, a borrower can make payment of the monthly instalments via cheque, however there is a clearance time for cheques so payments should be made at least 3 business days before the due date to ensure the cheque clears. However, keep in mind that when you apply for business loans in NZ, some lenders will not accept cheque payments.
Electronic Funds Transfer or EFT
As a borrower, you can utilize this repayment mode , the lender will supply you with nominated bank account details that the monthly payment needs to be paid to. You can set up an electronic funds transfer on a monthly basis to this account, just make sure you have sufficient funds in your account when the payment is due.
How to change the repayment mode?
Sometimes many borrowers wish to change their repayment mode from those listed above. They have many reasons for this. But you have to remember that each lender has specific methods to enable this transfer request. The best option is to contact the lender and ask what options are available to you and if you are able to change the payment type.
To sum up, we can say that altering the loan agreement might result in additional expenses, if the changes are not allowed with the loan agreement that you signed. When you make the changes for your repayments, though you get the opportunity to make lower monthly payments and for the longer term, this is disadvantageous as you have to pay more interest so this may not be the best option. So, never consider decreasing your repayment amount rather focus on improving your cash flow.