It takes money to start or run a business and unless you’re fortunate enough to have that money available, you may have to consider some financing. Many people take on small business loans either to start a new business, expand, or just to keep things going. To get the best out of a business loan, there are some questions you should know the answers to.
What is the specific reason you need a loan for? The reason, or your loan purpose, will determine how much you need, whether you should consider a term loan or line of credit, what payback options your cash flow can handle, and how quickly you need the money. These are a just a few of the many other elements that will affect your financing decisions.
There are minimum requirements for getting financing, and you should know what they are. Understanding a lender’s minimum requirements will help you narrow down the financing options that your business will likely qualify for. This will save you time and energy before you even get started filling out applications.
Before you decide on a lender, find out what kind of credit check they will be doing. Some lenders do what is called a “soft” credit pull while other lenders will do a “hard” credit pull. The difference is that a hard credit pull is recorded on your credit profile, which can be harmful to your personal credit and your ability to apply for financing elsewhere.
Do you know what the actual cost of capital is? If you don’t, you need to find out. If you get a financing offer from a lender they will show you the rates on the financing. The APR/AIR will be shown to you, but you should ask about the total cost of financing, how much you will be paying back. Having them put it in terms of cents on the dollar may make it easier to understand. That way you will know exactly what the loan will cost you.
Business financing can help you start your business or take it to the next level. Be smart and get the most out of your business loan.