“Neither a borrower nor a lender be, for loan oft loses both itself and friend”—Polonius to his son Laertes, Hamlet Act 1, Scene 3

As small business owners, we don’t have the luxury of following Polonius’ sage advice to his son, but we can be mindful of best practices when we do borrow money.

As a specialty finance company, Cedarcrest is frequently both a borrower and a lender, and we pay close attention to the mechanics of loan repayment from people and businesses who owe us money.

It matters a great deal to me, for example, if a borrower calls us up in a timely way to say her monthly payment will be 10 days late and she explains the reason why. It indicates the seriousness with which she takes the debt, and makes me inclined to be flexible, if need be, with this month’s payment.

On the other extreme is the borrower who does not return phone calls for a few months. When finally reached he will say, “Oh yeah, business is a little slow, I hope I can get it to you next week?” The non-communicative debtor has already set up an adversarial relationship.

Borrowers always know if their debt will be paid late, and lenders in contrast are frequently the last to know. The way to get flexibility as a small business borrower is to communicate early and often with your lender.

Even the timing of payments within a month matter. It makes a difference whether a loan payment comes on the first day of the month it’s due, or the last day of the month in which it’s due. The little things matter to lenders when deciding how to treat a borrower.

Lenders, whether a bank or a specialty finance company like Cedarcrest, would much rather waive fees and expensive collection efforts to a communicative borrower then to take adversarial action without much knowledge of the borrower’s situation.

Finally, not only should we be mindful of loan repayment signals we give to lenders, but it can make us money as small business owners as well. In the next BizBox entry, I’ll mention a way to get a great rate of return on money through early loan repayment.