Why You Shouldn’t Default On A Business Loan (& How You Can Avoid It)
Defaulting on a business loan could result in damaged credit and difficulty finding funding in the future. Here's how to avoid default.
Are you worried that you are going to default on a business loan?
Miscalculations, sudden hardship, declining sales, or any number of other things could end up with you struggling to repay your business loan. Don’t panic yet! There are several options for you.
Read on to learn about what happens when you default on a business loan, what you can do to make sure that it doesn’t happen, and how to get back into good standing if it does.
Table of Contents
What Happens If You Default On A Small Business Loan
If you miss a payment, your lender will most likely charge a late fee, an insufficient funds fee, or both. Try to avoid missing payments because even one or two missed payments can affect your credit.
If you can’t get back on track, your business loan will enter default status. Most lenders will give you a two-week grace period, but this varies from lender to lender. Default status means the lender is assuming that you’re not intending to make your loan payments, and they’ll move forward with taking the necessary steps to get their money back.
What To Do If You’re In Danger Of Defaulting
If you’re struggling to repay your debts, here are some things you can do.
Defaulting On A Small Business Loan: Final Thoughts
If you’ve done all this work to secure getting one of the best business loans available, defaulting on your business loans is something that should be avoided if at all possible. Loan defaulting is a depressing topic; nonetheless, it’s an important one to talk about.
If you’re struggling to repay your loans, the worst thing you can do is nothing. Keep in mind that a default is usually a lose-lose situation for both you and your lender, so be sure to communicate with them about your financial condition before the default process begins.
Scared of defaulting but still need money? You may want to consider invoice factoring.