What to Consider When Choosing a Business Loan Provider
If you are self-employed, a relationship with a business loan provider could be imperative to the success of your business. Even if you do not need additional funds for your business right now, it doesn’t hurt to research your options and be prepared in case the need arises.
While there is certainly no shortage of banks offering business loans, the key is to find a company that will provide the right type of loan and the services you need. Read on to learn more about researching loans for businesses and comparing loan costs to find the loan provider that is right for you.
Often times banks have certain requirements before offering loans for businesses. Some common requirements are proof of a business checking account and proof of certain financial statements. Some loan providers will also only provide loans to established businesses.
If your business is new, usually less than six months old, you may have a more difficult time finding a loan provider, or you may have to pay a higher interest rate or a transaction fee to secure the loan.
Understanding Your Business Credit
In addition to looking into the provider’s requirements, it is also important to understand your business’s credit. The three major credit reporting agencies are Experian, Equifax, and Trans Union. You can obtain a copy of your business credit report from any of these companies.
The credit score, or FICO score, found on these reports often dictates whether you will qualify to be approved for a loan, how much qualify for, your interest rate, and other terms.
Since the credit score is so important to obtaining a loan, it’s important to stay on top of it. The credit reporting agencies offer business credit monitoring. This makes it easy for business owners to stay on top of their credit score, so you can receive the loan you deserve.
Now that you have a better understanding of your business credit score, it is important to consider the interest rate you may be offered on your loan. A reputable loan provider should be able to give you an interest rate range prior to applying for a loan.
If your business credit score is good, you can expect to be in the lower range of the rate. If your score is poor or your business is new, you will likely be in the higher range. A credit score that ranges between 690 and 719 is a good score.
If your credit score is low, you may have to work on building or improving your credit before you can obtain a business loan.
Secure or Unsecure Loan
Another factor that will affect your interest rate is the type of loan you are offered. A secure loan has a lower interest rate, but you are required to put something down as collateral. If for some reason, you can not repay your loan, the bank can take your collateral as a form of repayment.
An unsecure loan does not require collateral, but the interest rate will be higher. When shopping for loans you should consider whether or not you have collateral and would be willing to use it as a form of repayment.
The term of the loan refers to how long you have to repay the money to the loan provider. A longer term will have a lower monthly payment than a shorter term.
A lower monthly payment might be more convenient depending on your business’s cash flow. The disadvantage to a longer term is you pay more total interest on the loan. When comparing loan costs, you want to calculate the total amount of interest you will repay over the life of the loan.
It is also important to ask the loan provider if you can pay the loan off early and if there are any penalties or fees associated with doing so. If there are no prepayment fees, you can take the loan out for longer terms and pay extra money each month or when you can to help defray the cost of interest.
In addition to prepayment fees, there may be other fees or penalties associated with a business loan.
Some lenders charge a one-time transaction, or origination, fee just to initiate the loan. This could be a flat fee or a percentage of the amount you are borrowing. The cost is then calculated into your monthly payments.
Other fees may include late payment fees, application fees, return check fees, and payment protection insurance. Make sure you ask about these fees prior to applying for the loan so you have a good understanding of everything you will be paying for.
You also want to find a loan provider that provides good customer service and is willing to work with you. Look for a loan provider that offers a straight-forward, user-friendly application process.
You will also want a company that has a quick turn-around time on a loan decision, so you don’t waste too much time waiting for the results. Finally, look for a company that can disperse the funds quickly, so you are not waiting around for the cash your business needs. Quick Loans America offers funds the next business day.
Choosing the Right Business Loan Provider
Now that you have learned a little more about finding a business loan provider, it is time to start looking for a business loan that meets your needs. Quick Loans America offers business loans up to $500,000. Check out their services and see if they are a good fit for your business today!