Once a loan has been disbursed to a customer, the lending institution has played their part as a financier and trusts that the client will repay the loan based on the appraisal process and the loan terms and conditions agreed upon. It is now entirely up to the client with a bit of guidance by financier to make payments as per the repayment terms on the offer letter.
What does a client need to do to ensure they meet the monthly repayments and uphold their end of the loan agreement?
The borrower will need to prioritize their loan repayment in order to ensure that everything goes smoothly. This sometimes proves to be a challenge if the borrower does not quite understand their financial position. And as the famous quote goes “If you fail to plan you plan to fail”What advice is therefore in place to guide borrowers to ensure they prioritize their loan repayments?
Here are four tips to ensure success
1.Direct the Loan to its intended purpose.
During the loan application process every client will have a clear purpose for which they are taking the loan, which most commonly include working capital, to acquire additional stock, completion of building projects, procuring an asset, importing goods, etc. Once funds are received some clients will entirely choose to forget the intended purpose and divert funds to other activities. Some have been known to set off to the latest holiday destination that is trending or buy the latest smart phone in the market. This means that the purpose of the loan will not be met and therefore the client will struggle to make loan repayments. Diversion of funds is one of the main reasons borrowers are unable to honor their payments. Borrowers should therefore ensure the amounts are injected into the business or intended project. Diversion also occurs during loan repayment tenure, where a client may have started off well with their repayment schedule but gradually diverts funds either knowingly or unknowingly. In this case the borrower will need to investigate where things started going wrong.
2. Keep proper records.
Borrowers need to track their progress through proper records be these daily, weekly or monthly. It is important for business people to track their finances and where one has a loan facility to pay, it is critical to track all kinds of expenses and purchases. This way the borrower will notice when they are going off-track, and expending things that are not in the plan and/or expending way more that will allow for their loan repayment. Once this is identified, it is important for the borrower to try and readjust as fast as possible before it is too late. It is observed that many borrowers also are not able to separate business and personal finances. The two get mixed up and it then becomes impossible to manage the situation. It is advisable that all borrowers kindly separate the two and ensure all the proper records required to enable the efficient execution of loan repayment are well kept.
3. Create a personal repayment plan.
Most financiers operate on a monthly repayment basis. However, there is none that will discourage early repayments. Therefore, the borrower needs to have in mind their lump sum monthly payment amount and identify if that amount may pose a challenge to remit at one go. For borrowers facing this challenging situation the option of having this broken into a weekly payment may be more comfortable for both the borrower and the business. This should be discussed with the financier to ensure the borrower’s repayment date is also as comfortable as possible. If a borrower can make weekly payments before the due date this will also create a good repayment history that will improve the borrowers credit rating and credibility for future borrowing requests.
4. Live within your means.
Taking the example of a child’s life, it is notable that there are different stages in the mobility process i.e. sitting, crawling, walking and finally running. That is the same analogy with business. Every business is at a particular stage in their mobility chart. Borrowers should therefore not chase what their friends, family or other businesses are doing. If others are doing big and great things, it is important to know that at some point baby steps were at play. These examples should be used as motivation enough to adopt their good practices and in-build these into the business to reach greater heights. It is very aptly said that ‘gradual and steady growth is more sustainable rather than fast and rapid growth’. Therefore, if one takes care of their business today at time will come when the business will take care of them. Most people are currently working for money but it’s important to plan and be consistent now that in future money works for them
Sometimes a borrower will do everything possible to prioritize their loan, but the loan repayments may still be a challenge. Should it reach this stage, the borrower should look for proper guidance from financial consultants, their financier and business peers to reverse the situation as fast as possible.
The loan borrowing and repayment process can be well managed and should not be viewed as an impossible task. In the words of the great author Jim Collins – The real path to greatness, it turns out, requires simplicity and diligence. It requires clarity, not instant illumination. It demands each of us to focus on what is vital and to eliminate all the extraneous distractions. has a great team of professionals working together to help you fund your dreams. Find more information on business loans here and get in touch with us on 0700 944 444 and capitalize your business up for success
Article by: John Kuria, the Recovery Manager at Springboard Capital Ltd and is very passionate about enabling customers to undertake loan management in a prudent and fruitful manner
