Companies in need of financing may be tempted to immediately agree to any business loan offer they receive. However, accepting the wrong funding proposition may jeopardize the future of your business. Here are some important factors to consider before you acquire a business loan.
Assess the Lender
Always work with a lender who has a solid reputation and a good Better Business Bureau rating. Even if you receive a loan offer, avoid lenders who lack professional websites or physical addresses, don’t require credit checks, or are vague about their fees. Look into the lender’s ability to provide effective customer support, and find out how quickly the lender can provide funding once your application is approved.
Obtain the Right Loan for Your Business
Numerous types of loans are available for small businesses, including lines of credit, term loans, SBA loans, credit cards, invoice factoring, merchant cash advances, and equipment financing. Decide which type of financing meets your company’s specific needs before agreeing on a loan offer.
Calculate the Amount You Need
Before accepting a loan offer, calculate whether it matches the amount of funding your company requires. If the amount is too large, your business may overextend itself in trying to pay it back, but if the amount is too small, you will not be able to meet the goals for which you want to take out the loan.
Consider the Terms
The terms that you should analyze before agreeing on a loan offer include the payment schedule, the amount of the payments, and the method of making payments. You should also consider whether you are willing to put any of your valuable assets at risk as collateral.
Evaluate the Cost
Accept a loan offer only if you are comfortable with the proposed interest rate. Additionally, calculate the various fees that the lender will be adding to the transaction such as processing, origination, late payment, and non-sufficient funds fees, and only take the loan if you think that these fees are reasonable.
For more advice on evaluating business loan offers, contact Signal Peak.