Stressed business owner at his laptop

What to Do If You Can’t Make a Loan Payment

3 min read • May 01, 2020 • Jesse Sumrak

Staying on top of bills during the chaos of the COVID-19 pandemic can feel impossible. With revenue dipping significantly or disappearing entirely, it’s difficult to find the capital necessary to pay your employees, suppliers, landlords, and lenders.

Dealing with landlords and letting employees go (or fighting to keep them employed) are their own battles—and lenders are a whole other ordeal. If you have an upcoming loan payment that you can’t afford, don’t panic. Below, we’ll show you a few tactics to keep your lenders satisfied and your cash flow flowing.

Find Short-Term Financing

It’s always scary to fight debt with debt, but sometimes it’s necessary. If you’re struggling to make your loan payments, consider one of these short-term financing options:

  • SBA Coronavirus Loans (COVID-19): While we expect overwhelming demand will exhaust the available capital quickly, coronavirus loans are still the best place to turn to first. A Paycheck Protection Program (PPP) loan can provide (potentially) forgivable cash to help you fund payroll, healthcare, mortgage, and rent, which can free up money to cover your loan payments. Or use an Economic Injury and Disaster Loan (EIDL) to cover essential day-to-day expenses and debt payments you can’t meet due to revenue loss.
  • Business Lines of Credit: Use a line of credit to cover practically any business expense: payroll, rent, debt payments, supplies—you name it! You can get funds in as little as 1 to 2 weeks, and then you’ll get immediate access to any funds you use as soon as you repay the amount used.
  • Business Credit Cards: If you don’t qualify for a line of credit, a business credit card is another great short-term financing option. You can make your necessary loan payments on your credit card and earn cashback and travel rewards while you’re at it. Plus, you can score a card with a 0% interest period (sometimes as long as 18 months), meaning you can make lower monthly payments with fewer consequences.

Negotiate with Your Lenders

Your lenders don’t want you to default. If you’re struggling to make payments, they may be willing to temporarily restructure your loan. This act could mean lower interest rates, payment deferments, and extended terms.

For example, Bank of America is allowing businesses to request deferments on loan payments without negative credit reporting. And Funding Circle is providing forbearance, repayment flexibility, and even late fee forgiveness. 

Talk to your lender and see what help they’re willing to provide. It doesn’t hurt to ask, and you might be surprised with their leniency.

Boost Your Cash Flow

Improving your cash flow during a global pandemic is probably one of the harder options, but it’s still possible. To boost your cash flow, you’ll need to increase sales or decrease expenses (or both). 

Consider areas where you can cut spending. Every dollar counts. And then look for where you can grow your sales. With the digital world as your oyster, there are endless possibilities for making revenue online.

Don’t Give Up

If you can’t make your loan payments, don’t give up. The entire world is facing challenges as a result of COVID-19, and there’s an enormous amount of charity at the moment. Banks and alternative lenders are lowering their loan requirements, and lenders are being generous with renegotiating loan payments. 

There’s a way out—you’ll make it through this. Hold your head up high and fight for your business’s survival.

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Jesse Sumrak

Jesse Sumrak is a Social Media Manager for SendGrid, a leading digital communication platform. He's created and managed content for startups, growth-stage companies, and publicly-traded businesses. Jesse has spent almost a decade writing about small business and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped startup. When he's not dabbling in digital marketing, you'll find him ultrarunning in the Rocky Mountains of Colorado. Jesse studied Public Relations at Brigham Young University.