Whether you’re planning on starting a new company or need to finance some expenses for an established business, it’s important to know your loan options.
5 Factors to Consider When Selecting Business Loans
There are several factors to consider when selecting business loans.
After all, your small business is/will be your livelihood. You wouldn’t want to make any decisions that will jeopardize the future of your company or your personal finances.
We don’t want to see that happen to you. Keep reading for a quick guide on everything you need to know about applying for business loans.
1. Eligibility
First, no matter how badly you want a loan, you won’t be able to qualify for it if you don’t have a respectable credit score. Yet, just because one door closes, it doesn’t mean you don’t have other options for loans or alternative financing.
For example, SBA loans typically have the strictest loan borrowing requirements. However, there are other lenders and investors who might be willing to take on a riskier client (one with a lower credit score).
2. Type of Loan
Next, think about what type of loan you want. There are SBA loans, personal loans, and other types of structured loans.
However, there are also lines of credit. You can get qualified for a certain dollar amount that you can spend as needed, rather than getting a loan for a specific purchase or investment.
Some business loan providers offer a revolving business line of credit. In revolving lines of credit, you can pull money out of the loan, pay it back, and use it again. This can be incredibly convenient for small business owners.
3. Monthly Payment Amount
When selecting business loans, you need to think about your monthly budget. How much can you afford to spend on monthly loan payments?
We recommend taking a minimalistic approach, rather than maxing out your loan amount. You don’t want to risk the security of your business by biting off more than you can chew. For this reason, you should also learn more about business insurance and how to protect your assets.
4. Loan Term and Interest Rates
Comparing loan costs is another important part of finding the best business loan for your needs. Find a lender and loan option that grants you an attractive interest rate. If you can qualify for a low rate, consider waiting a few months while you boost your credit score.
Additionally, think about the loan term. The longer the loan term is, the lower your payments will be. However, longer loans also equate to more money spent on interest over time.
5. Lender Credibility
Finally, when selecting business loans, you also need to take the lender’s credibility into account. We recommend researching potential lenders online to find customer reviews. You need to know how business loan providers treat their clients.
For example, if a client is late on a payment, are they automatically charged extra fees, or is there a grace period? What happens if the borrower wants to refinance the loan in the future to get a better interest rate or lower monthly payments?
Are You In the Process of Selecting Business Loans?
If you’re running a small business or looking to get one off the ground, selecting business loans needs to be first on your to-do list. As the saying goes, you’ve got to spend money to make money. Follow the tips in this article to make the best decision.
And if you’re looking for more entrepreneurial advice, take a moment to look through the rest of our blog. We have tons of information and content created for small business owners like you.
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