So, you’ve been approved for a small business loan—congratulations! You can now use that loan for the things you need, whether that’s expansion, new acquisitions, equipment financing, or bridging cash flow gaps.

But getting SBA approval is just the beginning. You’ll also need to plan ahead for cash flow deficits, keep up with compliance and reporting obligations, and manage your SBA loan funds effectively so your company can continue to grow and thrive with minimal financial risk.

Payment management and financial discipline.

A crucial part of SBA loan management is prioritizing loan repayment. After all, falling behind could negatively impact your finances and make it harder to qualify for future loans.

Here are some ways to ensure you keep up with payments.

  • Set up automatic payments to avoid late fees—This is generally best if you have consistent cash flow and can guarantee sufficient funds in your account when payment comes due.
  • Budget in loan payments—Add a separate category in your budget to ensure you don’t fall behind.
  • Cut down on other expenses—If funds are tight, seek ways to reduce other expenses as needed to prioritize the loan.
  • Pay more than the minimum when possible—If you have extra cash flow, put it toward your loan to pay it down faster (but check for a prepayment penalty first).
  • Avoid taking on new debts—Managing an SBA loan is much easier when you don’t have additional debts to worry about.
  • Pay down other debts—If you’re juggling several loans, look for ways to pay debts with higher interest rates or shorter terms to free up cash.
  • Understand your payment schedule and terms—Review the loan details so you don’t get blindsided by irregular repayment due dates, high or variable interest rates, or fees.

Cash flow planning.

As a small business owner, you might experience periods of inconsistent or even negative cash flow. Planning ahead can help keep your financials on track and ensure you never fall behind on loan payments.

You can do this by:

  • Creating payment calendars aligned with business cycles—This makes it easier to plan for upcoming expenses, revenues, and cash flow gaps.
  • Building payment reserves—These can keep you going strong during slower months.
  • Monitoring your debt-service coverage ratio (DSCR)—This shows lenders that your company can repay its debts (shoot for a DSCR of 1.00 or above).
  • Tracking your cash flow—This will give you a better understanding of your company’s current liquidity, financial obligations, potential shortfalls, and future cash flow trends.

Need some extra guidance on cash flow? Check out Lendio's in-depth guide on cash flow management.

Consequences of payment issues.

Before taking on a small business loan, know that there are consequences to falling behind on payments. While the SBA offers temporary debt relief to some borrowers, not everyone qualifies.

Missing even one payment could put your loan in “delinquent” status. The lender may contact you requesting payment. In the meantime, interest and possible late fees will still accrue.

Left unpaid, your SBA loan will go into default—usually within a few months of that initial missed payment. At this point, a few things could happen:

  • Late or missed payments can affect your business—and sometimes personal—credit score, making it harder to qualify for future financing.
  • The lender could attempt to take any collateral associated with the loan (including business equipment or real estate) to recoup the financial loss.
  • If you signed a personal guarantee, the lender may also seize personal assets like bank funds or your home.
  • If your business or personal assets don’t fully cover the unpaid debt, the lender may request that the SBA pays the remaining amount (up to the government-insured percentage).
  • Defaulting could trigger the acceleration clause (making you responsible for repaying the remaining balance plus interest all at once).
  • The lender may continue to pursue repayment through a lien or wage garnishment.

If you’re starting to worry about falling behind on payments, reach out to your lender right away about your options.

Compliance and record-keeping.

Certain SBA loan programs have continuing compliance requirements. Here's how to maintain compliance while managing your SBA loan post-funding:

  • Review the loan agreement for ongoing compliance or record-keeping requirements.
  • Keep accurate documentation of SBA forms and certification (including SBA form 1050, which verifies loan proceeds were disbursed as intended).
  • Keep clear records of your business's financials, operations, and fund usage in case of future review or audit.
  • Stay on top of payments.

Lender relationship management.

It helps to keep the lines of communication open with your lender and, in the case of the SBA 504 program, Certified Development Company(CDC). Through proactive communication with your lender, you could potentially:

  • Get ahead of potential issues before they arise.
  • Work through challenges like past-due payments related to temporary cash flow issues.
  • Restructure your loan terms to help manage payments.
  • Discuss other solutions like debt refinancing, debt consolidation, or forbearance.
  • Build a lasting borrower-lender relationship.

Planning and risk management.

As a small business owner, it’s important to plan for the unexpected. You can do this by:

  • Monitoring your business’s real-time performance compared to its projections using KPIs, profit margins, cash flow, and other key metrics, alongside financial goals.
  • Getting the right business insurance (ex. general liability insurance or commercial property insurance) to protect your firm against lawsuits, natural disasters, and accidents beyond your control.
  • Building cash flow reserves to protect yourself against financial risk and economic downturn.

Find the right lender for your business.

Successful SBA loan management means knowing how you’re going to use—and repay—the funds. It also means understanding the risks and doing what’s needed to maintain compliance and set yourself up for success.

Part of this means finding a lender willing to work with you through the ups and downs of business ownership. If you’re thinking about getting financing for your small business, apply now through Lendio’s marketplace. We’ll help you find the right partner and solution for your needs.

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