Taking out business loans can be very tricky for many business owners or start ups, simply because they do not know what they should look for. It is crucial to ensure you take all factors into consideration and you do your research thoroughly when it comes to commercial loans. There are many providers that offer business loans, so you have plenty of choices available. However, you do need to make sure you choose the right one for your needs.
Looking at a Variety of Factors
Comparing different business loans can get very confusing, particularly if you have never taken one out before. There are many different factors that you need to look at and a variety of things that you need to avoid when it comes to finding the right commercial loans for your needs and your business.
Some of the Things to Avoid
It is important to familiarize yourself with what you need to avoid when you are looking for a business loan. Here are just a few things you should avoid:
1: Don’t take out more than you need
Many people end up taking out more than they need when applying for a business loan. For some, it is just the temptation and the knowledge that they can get more money than they actually require. For others, it is the lender that talks them into it. Either way, remember you have to repay whatever you borrow with interest. Only request what you need for your specific immediate requirements and if obtaining a line of credit then what you would need for at least one year.
2: Don’t extend the repayment period
The longer your repayment period with business loans, the less you will pay each month. However, while this may sound ideal, you also need to bear in mind that you will pay more by way of interest when you have a longer repayment term. So, look at affordability and pay off your loan with the shortest term possible based on how much you can comfortably afford to repay.
3: Get a fixed rate
By getting a fixed rate, you will know exactly what you are paying throughout the loan term rather than having to worry about fluctuating payments. There are some variable rate commercial loans out there, and you should avoid these if you want to benefit from certainty when it comes to your repayments. Variable rates are great if you are in a market where the rates may be going down or for credit lines.
4: Don’t focus on the Interest Rate Alone
Many people focus only on the interest rate only. However, this is something that can change but most importantly is the total cost of obtaining the loan. Are there any loan origination points, appraisals, closing costs, balloon payment, acceleration clauses, etc. To carry out a true comparison, you should look at the Total Amount Repayable or TAR on these loans.
5: Don’t ignore the terms and conditions
Business loans come with a range of terms and conditions, so you need to ensure you do not ignore these. In fact, you need to pay very careful attention to them because they will provide details such as whether there are any penalties for making early repayments or whether you can take payment breaks from time to time.
6: Make sure you do not forget to look at other solutions
Although business loans are ideal for some people, you must not forget that there are also other solutions that may be better suited to your needs. For instance, you may be able to get a low rate credit card rather than a loan, or you may prefer to look at something such as a business line of credit.
8: Don’t assume your own bank is the best
Some people automatically assume that their own bank is the best one to go to for a business loan. This is because they think that the bank will focus on finding them the best deal. This is however not the case as every bank whether they are a national or community bank have a set box you must fit into for their loan products.
9: Understand what you are signing up for
With commercial loans, it is vital that you fully understand what you are signing up for. If you do not, you could end up with an unsuitable or unaffordable loan. Make sure you discuss every detail of your loan so you have a good understanding before signing any documents.
Let Our Experts Help
You can get help in finding the perfect loan from our years of experience and wide ranging loans from conforming to specialty non conforming business lines of credit. We prepare you and guide you along the way to ensure you receive the capital you need. We don’t provide denials only approvals, funding as fast as 48 hours. Call us today to have a free consultation. (800) 611-2747 – No dreams deferred.