Started Your New Business? Here’s How To Avoid Defaulting On Your Loan

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Most of the small business owners take a loan to start or run their business but it is important that a loan borrower doesn’t default on the loan repayments. Every person before taking a loan should understand the consequences attached to it. A loan account is also known as the Non-Performing Asset (NPA) which is based on 90 day and 120-day delinquency norms and in the transition phase and the cash flow of smaller entities have been affected because of the formalization of business through registration under GST.

In the recent statement by RBI, it has been stated that the owners of the small business are facing difficulties in making repayments to banks and NBFCs. The banks and NBFCs were allowed to temporarily classify their exposures to GST as Micro, Small and Medium Enterprises (MSMEs) that has 180 days past due guideline. But now the small businesses who are not registered under GST have been allotted relaxation in loan repayment.

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For the small companies which are not registered under GST, the norms will stay till December 31, 2018, and the companies registered under GST, the norms will revert to 90 days after January 1, 2019. Those who want to avoid defaulting on your business loan should follow some important points.

Know the dates for your EMIs

The first most important point is to know the repayment dates and it gets easier when you receive notifications on your mobile regarding payment dates and the amount is automatically debited through ECS. This method is helpful for those who have more than one loan running.

Maintain sufficient balance

To avoid the risk of defaulting on a loan, one must ensure the sufficient balance in the bank account. If someone doesn’t pay the loan within the 90 days then he/she may become a loan defaulter. The small business owners should keep a fund having at least three months of EMI in order to tackle with the loan payments and avoid being a defaulter.


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Take the advice of your lender

If someone doesn’t have the money to pay the monthly EMI then having a conversation with the banker can be a good idea. Instead of hoping that you don’t become defaulter talking to the lender about the situation can help manage your debt.

Try and reschedule your monthly payment

If someone feels that the monthly repayments are the real problem then negotiating with the lender to reschedule your loan payment will definitely help. But the information of rescheduling also reaches the credit agencies which can have an adverse negative effect on your credit card score.

Control the expenses

Someone who has taken a loan from the bank should keep a tight grip on the everyday expenses. A borrower should always take the amount of loan that you require for your business. The loan shouldn’t be considered easy money as it has interest and a repayment scheduled attached with it.


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