Taking time to reflect on your business is always worthwhile.
What’s working well and what isn’t? What are your goals for the next 12 months? Where can you make improvements?
Economic conditions can remain challenging for extended periods. Even when rates shift, many businesses continue to face subdued activity and ongoing cost pressures.
What’s working well and what isn’t? What are your goals for the next 12 months? Where can you make improvements?
Economic conditions can remain challenging for extended periods. Even when rates shift, many businesses continue to face subdued activity and ongoing cost pressures.
With that in mind, smart businesses need to keep looking for opportunities to get ahead. This includes optimising how they manage debt and their financial obligations.
Changing your repayments based on what best suits your business is one of those opportunities.
This includes considering shortening your loan repayment schedule and aligning loan repayments with your business income.
These two related approaches can be a powerful left-right combo for improving cashflow – a goal for most SMEs as they plan ahead.
Let’s take a closer look at these two approaches.
Changing your repayments based on what best suits your business is one of those opportunities.
This includes considering shortening your loan repayment schedule and aligning loan repayments with your business income.
These two related approaches can be a powerful left-right combo for improving cashflow – a goal for most SMEs as they plan ahead.
Let’s take a closer look at these two approaches.
Shortening your loan repayments
While many business loans are set up with monthly repayments, there can be advantages to switching to a shorter repayment cycle, such as weekly.
Reduced interest costs
Making smaller but more frequent repayments can help you pay down your loan faster – in turn, reducing the amount of interest you’re charged. Win.
Cashflow flexibility
Smaller, more regular repayments can be easier to manage than a single larger payment, helping smooth cashflow and reduce pressure on your working capital.
Improved financial discipline
Weekly repayments can bring you closer to how the business is performing, making it easier to see the flow of money in and out. Engaging more frequently with your cashflow can sharpen financial discipline and reveal new opportunities or efficiencies you might otherwise miss.
Adaptability amid change
SME owners know that unexpected events are part of running a business.
Property damage, machinery breakdowns, recruitment costs, or increases in overheads can arise at any time. A smaller, more frequent repayment schedule can help a business adjust more easily, without the stress of an imminent larger repayment. Weekly repayments may also allow for temporary adjustments to repayment amounts or terms while the business works through short-term challenges.
Property damage, machinery breakdowns, recruitment costs, or increases in overheads can arise at any time. A smaller, more frequent repayment schedule can help a business adjust more easily, without the stress of an imminent larger repayment. Weekly repayments may also allow for temporary adjustments to repayment amounts or terms while the business works through short-term challenges.
Aligning your loan repayments
When it comes to cashflow, even a matter of days can make a difference to your financial position.
Consider shifting when your loan repayments are due.
By aligning repayments with when you’re paid by customers, or when cash balances are typically higher, you can improve your cashflow position.
Getting these regular repayments out of the way can also give you a clearer picture of what funds are routinely available – whether that’s to reinvest in operations, build a cash buffer, or reduce other debts.
This approach can be positive for your lender too. A history of timely and reliable repayments may help when you’re looking to extend credit limits or apply for finance in the future.
Ultimately, this is about being in control of your cashflow – regardless of whether your operating cashflow cycle is short or long.
Consider shifting when your loan repayments are due.
By aligning repayments with when you’re paid by customers, or when cash balances are typically higher, you can improve your cashflow position.
Getting these regular repayments out of the way can also give you a clearer picture of what funds are routinely available – whether that’s to reinvest in operations, build a cash buffer, or reduce other debts.
This approach can be positive for your lender too. A history of timely and reliable repayments may help when you’re looking to extend credit limits or apply for finance in the future.
Ultimately, this is about being in control of your cashflow – regardless of whether your operating cashflow cycle is short or long.
Short cashflow cycle
Take hospitality as an example – an industry where cash often hits the account quickly. A café taking daily receipts could consider weekly repayments.
Rather than holding funds until a monthly repayment is due, weekly repayments may better align with daily takings. This can smooth out fluctuations and support more stable cashflow. Smaller, regular payments can also make it easier to understand how much working capital is available each week, while avoiding the stress that can come with a single larger payment.
Rather than holding funds until a monthly repayment is due, weekly repayments may better align with daily takings. This can smooth out fluctuations and support more stable cashflow. Smaller, regular payments can also make it easier to understand how much working capital is available each week, while avoiding the stress that can come with a single larger payment.
Long cashflow cycle
Many SMEs, such as those in construction, consulting, or manufacturing, operate with longer cashflow cycles – but they can still benefit from better alignment between income and loan repayments.
Diligent invoicing is essential – not only setting clear payment terms, but also maintaining regular communication and reminders so funds arrive when needed. In some cases, negotiating instalment payments from customers can help create a more regular income flow, making it easier to meet your own repayment obligations with confidence.
Diligent invoicing is essential – not only setting clear payment terms, but also maintaining regular communication and reminders so funds arrive when needed. In some cases, negotiating instalment payments from customers can help create a more regular income flow, making it easier to meet your own repayment obligations with confidence.
