“To become a successful Entrepreneur, stop bothering about being NPA”
NPA is a tag that highlights you as a default borrower in the crowd of thousands of bank account holders. Trust us; you can surely get rid of this tag just by focusing on the growth of your business. A strong business will never trouble you with external risks; it will actually help you to deal with them.
No account becomes NPA overnight, a constant sickness of an account leads to being an NPA. In our last blog “How A Bank Terms An Account Non-Performing Asset (NPA)” we focused on various aspects which banks consider, while observing the flow of money in the account and accordingly take steps to avoid the possibilities of having a default account. There are some more insights that need to be taken care of by assertive SMEs like you, who wish to skip the tag of NPA. So, let’s go through it –
Decline in sales, net losses, erosion of net worth. In short, bad financial performance
The money cycle of an account shows the real picture of a business. Therefore, if there is a decline in sales, erosion in net worth, net losses that means your business is incapable to repay the money. Hence, it is advisable that the borrower should try to maintain the flow of money and work towards the growth of business.
Incomplete documentations in terms of registration of charge/creation/mortgage etc.
Incomplete documentations might push banks to take your account under scrutiny and raise questions about it. While dealing with a bank or any other financial institution, it is mandatory to do necessary documentation and keep a track of it.
Timeliness and competence of response
Delay in the response might force banks to be a bit suspicious about your account. Stay in contact with bank officials, this will help to build the trust of a banker on the account holder. Hence, instead of hiding from the bank, respond them adequately and represent your business in a positive manner.
These are some of the aspects, which indicate banks about the probabilities of an account becoming NPA. Unfortunately, even after following banking rules, due to bad time in business, a lot of SMEs can’t pay the dues because of which they end up being NPA. Such SMEs are pressurized to pay the repay the loan, without bothering about SME’s plight of survival .
Hence, it’s a strong advice from NPA Consultants that “SMEs should not work for the bank to pay back their dues, but they should work for their business to develop and increase their revenue in order to service the loan”