When you’re starting a new company or expanding your current business, it seems like there are a million things that you need to think about. However, the most important thing would be- how to finance your business for growth?
Opening a small business is an excellent source of generating capital, but it can really be hard to choose from the loan options available to small business owners. Conventional bank loans, peer-to-peer loans, online working capital loans are just a few types of loans that small business owners are eligible for.
Fortunately, to make things easy for you, there are some factors to look out to ensure that you’re getting the right kind of loan. This article will talk about three factors to keep in mind while searching for a business loan.
#1 Limit the number of loans you apply for and get a loan from a reputable company
When you’re looking for a business loan, it might be tempting to apply for as many loans as possible in the hopes that someone will agree to give a loan. However, applying for as many loans as possible can hurt your credit score, which will make it hard for you to get a loan.
When considering different financing options, you need to determine what your needs are. If you’re looking for a quick way to finance your purchase orders in order to pay your suppliers, then purchase order financing is your best option.
Plus choose a reputable company to take the loan. For example, financial experts opine that many companies provide loans, but Nav has the best small business loans, and they are known for their excellent customer service.
Therefore, before applying for a loan with any company, make sure that you compare the customer satisfaction rate also, along with the rate of interest.
#2 Understand the complete cost of a loan
Lenders levy loan costs in many different ways. Some might say to you the interest rate on a loan, and others might say to you the total amount of money that you have to pay back. When there are differences in statements, it gets tough to compare loan options.
To make things easier, ask the lender to share the Annual Percentage Rate of the loan. APR, a term you might have heard of if you have bought a home or car, it is the entire cost of a loan (including fees) over one year.
By getting APR from different lenders, it will be easier for you to choose the best lender.
#3 Prepayment penalties
A prepayment penalty means a fee that the lender charges if you pay off a loan before its due date. By paying off the loan early, you’re reducing the interest amount that lenders earn on loan, so they charge a penalty fee.
The fee depends on company to company, but generally, it is three to four percent of the outstanding balance of the loan.
Though not all loans come with prepayment fine; for instance, the SBA loans don’t have any prepayment charges. Whenever you are looking for a loan, try to negotiate the removal or reduction of an early payment penalty.
If not, then make sure to read loan agreement papers before signing it. This will help you understand how much you will be charged for the prepayment of a loan.
The above-mentioned are some of the tips which can help you land the best loans. Always make sure that you choose a trustworthy spokesperson in order to get the right loans. Also, to your benefit, research online and then only settle down for a loan.