You can ask for a pause in business loan payments when your business is facing a temporary financial setback and you need help managing your debt. These pauses in payments are sometimes called “payment relief” or “business loan deferments.”
But before you contact your lender, you should come prepared with financial statements and documents that show:
- Why your hardship is temporary.
- How you plan to get your business back on track.
It also doesn’t hurt to have a strong payment history with your lender and to reach out before your situation becomes so dire that you have to miss a payment.
Use this sample script as a guardrail for how your own conversation with your lender may go.
How much do you need?
We'll start with a brief questionnaire to better understand the unique needs of your business. Once we uncover your personalized matches, our team will consult you on the process moving forward.
This script was developed with input from two bankers that handle these sorts of calls: Kevin Janusz, vice president and SBA lending manager at Beneficial State Bank, and Maggie Ference, senior vice president, small business and SBA director at Huntington National Bank.
Your script for asking your lender to pause loan payments
Explain your situation in detail
You: “Hi, I’m hoping to speak with someone about a financial hardship I’m experiencing with my business and what my options may be for managing my loan payments.”
Lender: “Sure, I can see what I can do for you. Can you tell me more about the financial struggle you’re experiencing?”
You: “I’m having some cash flow issues, and I don’t have enough money at the moment to make my next few loan payments.”
Lender: “OK, and do you know what may be contributing to the cash flow issues?”
You: “Yes, [Explanation of Root Cause of Cash Flow Issues, e.g., difficulty hiring/retaining employees, loss of a key client account, supply chain issues, etc.].”
Lender: “That’s helpful to understand. And have you taken any action yet to address the issue and get back on track?”
You: “Yes, I’ve tried [Explanation of Efforts Made to Manage Cash Flow Challenges, e.g., multiple job postings on multiple platforms, new client outreach, attempts to negotiate better pricing in supply chain contract, etc.].”
Offer your supporting evidence
Lender: “OK. The more you can explain for me what’s led up to this point where you feel unable to make payments and the more documentation you can provide to show the steps you’ve taken to get back on track, the better position I’ll be in to help you.”
You: “Sure. I have my latest profit and loss statement and balance sheet. I also have [Documentation Proving the Efforts You’ve Made to Manage the Issue, e.g., screenshots of job postings on multiple platforms, ads or emails proving outreach to attract new clients, copies of communication with your supplier regarding contract negotiation, etc.]. I can send those over to you.”
Lender: “That’s great. Those should all be very helpful here. Please send those and any other documents you may have to support your request so I can review them in detail.”
Ask your questions
You: “OK. And if you accept the request, how long am I able to pause payments for?”
The lender’s response here will vary depending on your loan type and the lender’s deferment policy. Typically, you’ll find that a pause can be anywhere from one to six months/payments.
You: “Will you report the pause to credit bureaus? If so, would that impact my credit score?”
Lender: “Yes, we do report deferments to the major credit bureaus. Typically, the payment pause is just noted in your credit report rather than directly impacting your score.”
You: “And how will the pause affect my future loan payments, once the pause ends?”
Lender: “Interest will continue accruing on your payments, even while they’re paused. So that means your total repayment amount may increase. I can let you know how much your total repayment will be affected once I review everything more closely.”
You: “So pausing will cost me more overall?”
Lender: “Your monthly payments may increase for the duration of your term to account for the payments not made during the deferment period. Again, I can come back to you with the new loan amounts after I’ve reviewed your file.”
Note: Depending on the lender and loan type, instead of increased regular payments you may have the option of making a single, large payment, called a balloon payment, at the end of your loan term. And some lenders may allow you to extend the loan’s term length as part of the deferment process.
You: “I’m glad I asked. This is all really good to know. I guess I don’t really have a choice, though. At least if I can pause the next few payments that buys me time to figure out a longer-term fix and also make a plan for how I’ll handle the higher loan payments going forward.”
Lender: “Of course. There are also some other options we could look at for you instead of a pause in payments. For example, making interest-only payments or restructuring your loan or even opening a business line of credit.”
You: “You’ve given me a lot to think about.”
Lender: “Yes, there’s plenty to consider here. But you have options, and we’re happy to work with you to see what we can do to help. I think we should schedule a follow-up call in the next couple of days where I can run you through a few options with real costs. When’s the best time to reach you?”
You: “[Days and Times You’re Available].”
Lender: “Great, we’ll talk soon.”
You: “Thank you. Bye.”
What if you already missed a loan payment?
You can’t request a pause in loan payments if you’ve already missed a payment. But we have an article to guide you through some important steps you can take to manage the situation if you’ve missed one payment.
Alternatives to a pause in business loan payments
If you know you're going to have trouble making upcoming payments on your business loan, you may have other options available to you instead of (or in addition to) deferring payment.
Interest-only payments
- What it is. You pay just the interest for a short period of time (similar to a payment pause), rather than repaying the principal plus interest. This means for a temporary period your loan payments will be smaller.
- When to consider it. You need short-term relief but can still afford interest payments.
Restructuring your loan
- What it is. You work with your lender to permanently change the rates and terms of your existing loan so that your monthly payments are lower.
- When to consider it. You expect your hardship to last more than a year and you’re at risk of defaulting.
Business loan refinancing
» MORE: How to refinance a business loan
- What it is. You take out a new business loan with a longer repayment period and/or lower rate to pay off your current loan.
- When to consider it. You qualify for a new loan that offers lower monthly payments.
Business line of credit
- What it is. A lump sum of money you can access as needed. Like a credit card, you only pay interest on what you use.
- When to consider it. You already have one open and need funds to cover a short cash flow gap or emergency expense.
A lender may be able to offer you a business line of credit with an interest-only period, which you could use to plug your gap in available working capital, says Kevin Janusz of Beneficial State Bank. An interest-only line of credit along with a pause in payments may give you the breathing room you need to get your business back on track before resuming payments on your original loan (plus repayment on the new line of credit).
It may seem strange to take on more debt while struggling to pay your current loan, but this option is likely a better alternative than turning to a merchant cash advance. Line of credit interest rates are generally much lower than MCA rates, and the repayment terms may be better (longer and less frequent than with an MCA).
