Are you in the process of learning more about a business loan? Do you have reason to believe this is just what your company needs to grow? Do you have some concerns about making a final decision?
As excited as you may be about the idea of securing a business loan, it’s never easy to pull the trigger. This is a big decision that should be treated as such.
Although the average loan extended to U.S. businesses in 2017 was nearly $700,000, that doesn’t mean you have to borrow this much. Remember this: don’t borrow as much money as you qualify for, but instead the amount that you actually require.
As you begin your search for a business loan, do so with these five things in mind:
1. Interest Rate
Simply put, the lower the interest rate the less money you’ll pay over the course of your loan.
Since different lenders have different rates, it’s important to shop around with this detail in mind. A percentage point may not sound like a big deal, but it will greatly impact your monthly payment and total amount of money out of your pocket.
While a longer term means a shorter monthly payment, it also means more money spent in interest.
Most lenders offer business loans in a variety of terms, so work out the numbers for any arrangement that piques your interest.
3. Lender Reputation
You don’t want to borrow money from just any lender. Instead, compare the best of the best to get a better idea of which one most closely aligns with your goals, wants, and needs.
Some lenders have a great reputation among business owners, while others have fallen short in the past.
Tip: in addition to speaking with people in your network, read online reviews for a better idea of what others think of each lender you’re considering.
In a perfect world, you’d qualify for the type of business loan you’re interested in. Even better, you’d qualify for the exact amount of money you need.
Unfortunately, things don’t always work out this way. That’s why you need to understand the qualifications for each type of loan, ranging from credit score to collateral.
5. Application Process
No two lenders have the exact same application process. Answer questions such as:
- What type of information is required on an application?
- How long does it take to complete an application?
- Are you able to complete the process online?
- How long does it take to receive a decision?
- What’s the process for securing funds if you decide to move forward?
This is one of the most important things to look at, as you can’t secure any money until you complete an application.
There are among the most important things to look for in a business loan. Once you have all of these details in order, you’ll feel better about your ability to find and secure the financing you require.