After I signed on the dotted line, the real work began. The funds from my business loan were sitting in LendEDU’s bank account, and we finally had the capital we needed ahead of the busiest time of the year.
Getting your small business loan funded is an exciting time for an entrepreneur. While you want to take time to celebrate, you also know that you need to get down to work and use that money to grow your business.
Locking down the money is, after all, only half the battle. You also want to make sure you have everything in place to spend it right and be in a position to repay the loan responsibly so that you can build good business credit and set yourself up for future borrowing success.
6 Immediate Next Steps for the 30 Days After You Secure a Startup Loan
1. Get Ready for Repayment
You just got the money, so you might not be thinking about your repayment yet—but you should be. Repaying your debt responsibly and on time is critical for a number of reasons, the first being that it helps you build your business credit.
Even if you use your personal credit to get approved, taking out a loan in the name of your business creates a track record that shows whether or not your company is able to take on debt and meet its debt obligations on time. Your business credit score, like your personal credit score, will improve based on responsible behavior which will help with your eligibility to borrow more money at lower rates—and potentially without having to use your personal credit—in the future.
So, make sure to add your debt repayment to your budget right away and set reminders for paying it. Better yet, sign up for automated payments. Some lenders will give you an auto-pay discount if you do and you’ll ensure that you never miss a payment.
2. Use Your Money
This one seems obvious, but it’s still worth noting. You borrowed this money to help boost your business. Whether you intended to buy new equipment, hire new staff, or cover cash flow issues, if you drag your feet on putting the cash into action, you might not realize the full value of the loan on your business.
Start with the right budget so you can map out and track each expense and avoid running into surprises as you go!
3. Consider Repaying Early If You Can
Why pay more than you need to pay in interest on your business loan? The best businesses run a tight ship, and if you don’t need to borrow the money for the full length of the term, you might consider repaying it earlier—especially if you experience an unexpected uptick in revenue due to seasonality or overperformance in your marketing efforts. Run the numbers and see if this could be possible for your business.
You might want to add it into your longer-term budget to make sure that it makes sense. Some business credit bureaus, like Dun & Bradstreet, give your score a boost for making prepayments. Be sure to check the fine print of your loan contract as some loans for small business charge prepayment fees if you repay your loan early.
4. Create a Strategy for Business Growth
When you take on a debt obligation in your business, you’re often personally liable if you’re unable to pay. Now is, therefore, a great time to kick your business growth strategy into high gear or create one if you don’t already have one. The more your business can grow and bring in more revenue, the easier it will be to repay your debt and the less the risk that you’ll ever be personally liable for that money.
5. Start or Build an Emergency Cash Reserve
There are many challenges when it comes to running a small business, but the most important lesson you’ve likely learned is not to expect things to go as planned. There is always that client who pays late or the big product shipment that costs more than you expected it to or ended up being faulty. The last thing you want is for a perfect storm of bad luck to keep you from making your loan payment.
That’s why it’s critical that you start or build an emergency reserve in your business. These funds will help you cover last minute emergencies, withstand cash flow issues, and make sure you can always pay your loan payment.
If you don’t have a cash reserve already, then you should start building one this month. If you do have a cash reserve, now is the time to add to it to include the expenses of your loan. Business experts suggest you keep at least 3 to 6 months worth of operating expenses in your reserve.
6. Find a Solution for Managing Your Money
If it wasn’t clear already, having more money in your business’s bank account doesn’t just mean you can afford to do or buy more, it also means there is more work to be done to manage it. If your vision of being a business owner or CEO was spending Saturday mornings clicking between bank statements and spreadsheets trying to balance your books—by all means go the DIY route. However, if you’ve embraced the more rational mindset that being a good leader means knowing when to delegate, it’s time to start shopping for a solution that works best for you.
The Entrepreneur's Guide to Accounting and Tax Options is a great place to start researching different approaches to cover your financial bases from taking care of basic bookkeeping all the way through accounting that meets VC’s expectations.
Now is an exciting time. You have the opportunity to build your business with additional capital and take it to the next level. Once you take care of these steps, focus on that rather than worrying too much about repayment.