Impact of Business Loan EMI Bounce on Your Creditworthiness
There can be several reasons for a business EMI loan bounce like financial instability, long receivable cycle, inability to manage finances, unexpected expenses or low balance in the bank account. Nowadays, most lenders are using Electronic Clearing Service (ECS) automating the EMI collection process. ECS debits your business loan EMI due automatically from your bank account on the due date. Lenders charge ‘EMI Bounce Charge’ in case the automatic EMI payment fails.
A good credit history increases the chances of getting business loans quickly with lower rate of interest. A better credit history elevates the business’s reputation, builds trust among customers, suppliers and other stakeholders. Eventually, good credit history makes credit access easy.
Let us find out how business loan EMI bounces affect your creditworthiness:
Credit Score Impact
Credit History
Interest Rates
Business loan EMI bounce also contributes to higher interest rates with other major drawbacks. Borrower might have to take future business loans at higher interest rates compensating for the defaults made in EMI payments.
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Loan Approval
EMI bounce makes it highly difficult for the borrowers to get approval of loan effortlessly. Lenders easily approve loans to the borrowers who pay regular EMI and have a good track record maintained.
Payment of fines and additional charges
Damage to business reputation
EMI bounces can effectively damage relation of the borrowers with the lender making it difficult to seek additional fund or making the lenders to be rigid on the loan terms set out in. Not only it affects the relationship with the lenders but also with customers, suppliers, and other stakeholders.
Legal Consequences
Disruptions in operations
Borrowers may face disruption in operations as they may have to divert the funds to repay the loan affecting payments related to inventory purchase, salaries and other day to day operational expenses. In case of secured business loans if the borrower has mortgaged factory land and building, lenders might seize this collateral again affecting the operations of the business.
Thus, missed payments can affect your cibil score negatively. Business loan EMI bounce affects your credit report and credit worthiness making it difficult to get further loans. Borrowers must pay timely EMIs. A good credit history makes credit access easy. Default in loans set a bad example and lenders might lose trust on the borrower. You can ensure that your credibility remains strong by paying all the EMIs on time.
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About Red Fort Capital
Red Fort Capital is dedicated to empowering Indian MSMEs (Micro, Small, and Medium Enterprises) on their path to business growth through customized business loans. We understand that securing a business loan in India can pose significant challenges, particularly when factors like a less-than-ideal credit score, a relatively short business history, unclear financial records, or variable cash flow come into play.
As a respected Non-Banking Financial Company (NBFC), we take pride in offering a diverse range of secured business loans, spanning from 1 to 10 Crores. What sets us apart is our remarkable ability to disburse funds fast, in just 7 days. Our financial solutions are meticulously designed to cater to a spectrum of needs, including working capital requirements, equipment and machinery purchases, invoice/bill discounting, and last-mile financing, among others.
