Business Loan

What Shall I Do In Case If I Am Not Able To Pay The Business Loan?




The company, whether large or small, often requires additional funds to meet day-to-day operational needs. The amount of money needed is often determined by the nature of the company – is it capital-intensive, and what stage of development is it in, in terms of inception, growth, or maturity? Typically, companies need the most funding in their early stages and for future expansion. In this post, we will go through almost all of the different types of business loans that financial institutions in India offer. Compare business loans


  • Term loan
  • Start-up loan
  • Invoice Financing
  • Equipment financing
  • Overdraft
  • Loan under a government scheme


  • Collateral free
  • Minimal documentation
  • Fast processing
  • High fund value
  • Fixed interest rate


  • Age- 21 years to 65 years.
  • The Applicant must own, and it must be in operation for the last 3 years.
  • Show the last 3 years ITR filled. 


  • KYC Documents
  • Proof of residence like Ration card, Electricity bill
  • Proof of business
  • Identity proof like Aadhar card, PAN Card, Voter ID Card.

So, the question is, What shall I do in case I am not able to pay the business loan?

  • A loan default occurs when a borrower fails to meet a predetermined term of the loan agreement. This usually happens when a creditor fails to pay the agreed-upon instalment payments. As a result, the lender has no choice but to take legal action against the borrower.
  • Failure to make payments on a business loan is not a new occurrence, and many hard-working business owners found themselves in positions where they couldn’t meet their financial commitments even before the pandemic. They were late on payments in some cases. Other times, payments were completely skipped. Some lenders are more forgiving of delinquency than others; however, late and missing payments can eventually result in a default.

When You Realize You Won’t Be Able to Pay

Hopefully, you’ll have enough time before the next bill is due. If this is the case, you have time to act before you fall behind on your payments. At this point, you might still have a few choices, including:

  • Late payment:- It’s preferable to make loan payments on time, but if you can’t, marginally late is preferable to completely late. Make every effort to pay your lender within 30 days of the due date. Late payments are often not reported to credit bureaus; because late fees are rarely posted to credit bureaus, your credit will not get affected. You now have the option of consolidating or refinancing your debt.
  • Consolidate or refinance:- A different loan may be ideal for you. Consolidating with a personal loan, particularly with toxic loans like credit cards and payday loans, results in lower interest rates and a lower required payment. Furthermore, a new loan usually allows you to repay it for a longer period.
  • Communicate with your lenders:- If you think you’ll have trouble making payments, let your lender know. They might be able to assist you by altering your due date or allowing you to miss payments for several months. Explain why you cannot make the payments, make an offer that is less than what you owe, and see if they can consider it. 

What are the consequences of defaulting on a business loan?

  1. Credit score decline

When you skip a payment, the lender will report you to credit bureaus. This lowers your credit scores, putting your chances of getting a loan accepted in the future in jeopardy.

  1. Foreclosure or legal action

The repercussions of a business loan default differ depending on whether you applied for a secured or unsecured loan. A foreclosure on a secured loan gives the lender full control of all of your assets and properties included as collateral in your loan agreement. To recoup their losses, they typically sell the collateral at a private or public auction.

  1. Increased interest rate

If your credit score decreases, your interest rates will rise, or you have to pay an exorbitant late fee, depending on your business loan agreement. This would affect both your existing loan repayment and potential loan approvals.

  1. Bankruptcy declaration

If you default on the loan, your lender will file a lawsuit to reclaim the money you owe. It is possible to seize the equity for a secured loan. As previously stated, lenders can sue you if you default on an unsecured loan. The loan will be repaid using the court-ordered process.

  1. Keep track of your schedule

Always keep track of your instalment due dates. It guarantees that you have the required funds in your account. It also aids in the better planning of your finances in the event of additional business expenditures or loans. And if you skip a payment, you are not considered to be a defaulter at that very movement. It can, however, result in late fees.

  1. Keep in touch with your lender

If you believe that servicing the instalment would be challenging in the coming months, speak with your lender. It’s not a good idea to wait and risk defaulting on your loan. Your lender may be appreciative of your positive approach to debt management and may assist you by lowering your monthly payments.


It could be helpful to start with the worst-case scenario. If you avoid making payments on a loan, you will finally default on it. As a result of the fines, taxes, and interest charges accruing on your account, you will owe more money. Your credit score will suffer as well. It can take many years to repair your credit and borrow again, but you can do so in as little as a few years.


Do make sure you’re not behind on your payments when it comes to debt management. After that, if you still believe you’ll default on your loan, staying silent isn’t a choice. You are responsible for repaying your debts in a manner that protects your business.

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