All business, no matter big or small, will require financial assistance at some point in their lives. This is when the business loan will prove to be the ideal solution. This loan for business is designed in such a manner, keeping in mind the unique requirements and functioning of each business while ensuring all the financial requirements are met.
However, even the best run business can hit an unexpected cash flow problem, especially if a major customer of theirs fails to pay. In this case, the best of intentions can go out of the window. So if you find yourself and your business in a position where you’ve missed your payment on your loan you’ve taken on your business what can you do?
Normally, as soon as your lender realizes that you have defaulted, they will be in touch. Each lender will normally have a different policy on their issues. While some do offer a grace period if your payments are not too late. However, if the matter does not get resolved, your lender will report the late payment to the credit bureaus, which in turn can damage your credit score. This will in turn, make it more difficult for you to secure your finances in the future.
Here are some of the default scenarios that can occur to your business:
• Defaulting on a secured loan: If the business loan is secured on an asset, there is a high chance your lender will claim the said collateral to repay the debt. This can be anything from your business to your home or any other similar asset of high value.
• Defaulting on an unsecured loan: An unsecured loan will be completely different from the secured loan scenarios. For one, you lender won’t be able to seize any asset of yours. However, they will charge a late payment fee, and possibly increase your interest rate. If you further cannot repay back the borrowed funds, they can purse a legal solution against your company. In this case, you may be forces to liquidate your assets to pay the settlements.
• Defaulting on a personal guarantee: If you fail to repay a loan for business wherein which, you stand as a personal guarantee, the lender can pursue you personally and not just your company itself. If the court upholds your claim, the lenders can seize your personal assets and liquidate them to cover the debt.
So what can you do to avoid getting into this position?
As you can see, the consequence of defaulting on your loan can be either extremely sever or mundane. Therefore, you should very cautious about taking on a new loan, in order to avoid increasing your debts. You must pay close attention to your cash flow, ensuring that you will have the required funds on your hands to make the loan payments in a timely manner. If you find yourself in a position where you will be unable to meet a payment, you must contact your lender immediately and explain your situation. In this case, most lenders will work with your in your interest and their own.