What Happens If I’m Unable To Pay A Business Loan?

If you take out a business loan and it turns out that you’re unable to repay the full value of the loan, you may be wondering what will happen. In this blog from Progressive Business Capital, we’ll give you an overview of the basic things that will happen if you fail to pay your loan. Read on and learn more.

You’ll Face Late Fees & Penalty APRs

First and foremost, your loan provider will charge you late fees and may also charge a penalty APR (interest rate), depending on the type of loan. These late fees can be quite significant, ranging from a flat fee like $10 or $35 to a percent of your loan’s value.

Your Credit Score Will Drop

Even a single late payment can drop your credit score by quite a bit. If you’re late multiple times, your credit score will be reduced even further, and it will be difficult to secure the same terms on future loans. The rates will be higher, and you may not even qualify for future loans in some cases.

Your Loan Will Eventually “Default”

Loans usually enter “default” after a few months. This means that you have not made any payment or attempt to contact the loan provider to work out a payment plan. Defaulting on a loan will also have a serious negative effect on your credit score and ability to borrow again in the future.

Your Assets May Be Seized Depending On The Type Of Loan 

Most business loans fall into two categories – secured and unsecured. Unsecured loans are not “secured” by any collateral such as personal assets, business equipment, or other such assets. This means the bank can’t seize your property if you stop paying.

However, lots of small business loans do require collateral, making them “secured” loans. If you do not repay your loan based on your loan agreement, your personal and/or business assets can be seized and resold by the bank to compensate them for your defaulted loan.

Your Defaulted Loan May Be Sold To A Collections Agency

Depending on the type of loan and its value, bill collectors from the bank or other issuing provider may attempt to contact you and get you to pay for your defaulted loan. But in most cases, defaulted loans are “bundled” together and sold to bill collectors.

After buying your debt, these bill collectors have the right to be paid instead of the bank, so you may need to work out a payment plan to repay your issued loan. You may be faced with calls, mail, emails, and other intimidating communications that are meant to make you pay up.

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Find The Right Business Loan And Reduce The Risk Of Defaulting On Your Loan

In most cases, business owners default on loans when the terms were not in their best interest, they didn’t understand the terms and conditions of the loan, or when they just choose the wrong type of loan.

Progressive Business Capital is here to help. Our team can connect you with a wide variety of loan options and help you determine which is the best fit for your unique situation. Contact us online or call us at (800) 508-4532 to get started today.

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