Taking out a business loan can be a big, but necessary decision. However, there are a few important questions you need to ask yourself and figure out the answers to before you sign on the dotted line.
If you want to make sure you know the facts, and that you’re doing the right thing for your business, make sure you ask these questions:
How Much Will This Really Cost?
Before you take out a business loan, you need to be sure that you know exactly how much this will really cost your business. It can be tempting to go for the lowest rates when you’re applying, but you need to think about things like arrangement fees, which aren’t always advertised online. This fee may be payable upfront, or it might end up in with the cost of the loan. You absolutely must be aware of additional costs before you put your name on the dotted line.
The price or rate you pay for the loan can be presented in many ways too. Not all lenders are created equal, so you’ll need to be aware of how they are presenting their loans so you can understand what you’ll pay back properly. If you happen to end up with a few quotes based on different rates, try looking for a tool that can help you to compare the cost of borrowing.
Have I Explored All Of My Options?
When taking out a loan, it’s so important you explore all of the options available to you so you get the right deal for your business. While you can take out a regular loan from the bank if your credit score and other things match up to the expected standards, you shouldn’t stop at exploring there. Investors could be an option for you, or even peer to peer lending. Some companies look at their assets and use them to take out a loan; you can find new details here to explain further. Knowing all of your options and looking into each one ensures the best outcome for your business.
How Long Can I Borrow For?
Before you’ve even applied for your loan, you need to know how long you need it for. Will it be short term, or long term? Will you need a larger amount of money, or is this simply to bridge a cash flow gap temporarily? Would you like to pay it off over a longer period of time, or pay it off with lower monthly repayments? As a business owner, you should know how much working capital is in your business each month, so use this to determine an affordable repayment sum. Make sure you take into account the maximum term. It’s definitely worth doing your own research to ensure your term is acceptable to you.
Some long term loans may require security, so you may need to look into your company assets. If you don’t have any, then you may need to revise your term and the amount you need.
When Will I Have The Money?
Some businesses may need the cash yesterday, others may be ok to wait a while. When you will have your cash will vary wildly, from a couple of days to a few weeks after a meeting, ensuring you meet the criteria required. It isn’t always a good idea to go for the lender who can give you money the fastest, so make sure you think about this rationally. Although the desire to have the money right now may be strong, it can be worth waiting so you get it from a better source.
What Is The Service Like?
Knowing you’ve loaned money from a company with a great service is a must. You may get your money in a few days, but if the customer service is awful, you will regret your choice. You need a company that will work to understand your business, give you honest answers to any questions you have, and offer a professional service all throughout the application process and afterwards too.
At some point, you may want to discuss or revise your repayment plan. Can you be sure that somebody will be on hand to do this if you need them? What will happen if you’re a little late with your payment? Make sure you find these things out before applying. Independent review sites can be a huge help when you’re doing your own research.
Why Do I Need This Loan?
This may seem obvious, but knowing why you need the loan will help you to figure out whether it’s more of a long or short term loan, and how much you are willing/able to pay. Sit and think about why you need the loan, and you may even be able to come up with alternative solutions.
How Do I Make The Payments?
Finally, it’s important to know how you will be expected to make the payments. Will the company accept paper check, or would they prefer automatic payments? In the high majority of cases, it’s better to set up an automatic payment so you’re never late. This way, you avoid any interest fees and fines, and ensure you budget for each payment effectively. If you can pay pretty much whenever, you’re more likely to put the payments off until it gets harder to pay them.
If you’ve asked these questions and come up with satisfactory answers, then you can consider taking out your business loan. Providing you know your numbers and you’ve done the right research, you should be able to find the right company offering the right policy that’s just right for your business. Make sure you consider everything that could cause bumps in the road too, just incase you need to come up with a plan B later on down the line. Ideally, you will select a company you can call and discuss any problems with instead of a company that is unavailable and unopen to discussing new payment plans. Good luck!