Nearly 50% of businesses within the United States don’t make it past the first five years. However, there are ways you can avoid this scenario.
One of the most important aspects of running a successful business is securing the correct type of funding. However, not everybody understands how to pick a business loan provider that is right for them.
Before you fill out a business loan application, let’s take a look at everything you need to know.
HOW’S THEIR PAST REPUTATION?
Not all loan providers are created equal. It’s important to do your due diligence and look into a loan provider’s past reputation. Have they had any complaints filed against them, either from current or former clients?
What is their customer service like? If a loan provider has received more negative feedback than positive, then it may be best to avoid them altogether. Reading online reviews goes a long way, so don’t neglect this obligation.
When looking through feedback, keep an eye out for reviews that don’t seem genuine. These often sound more like advertisements than legitimate comments.
WHAT TYPE OF LOAN ARE YOU LOOKING FOR?
Before you even begin your search for a loan provider, you should have a good idea of the type of loan you need.
Some providers specialize in certain types of loans, such as unsecured business loans or secured business loans. Knowing the type of loan that best fits your needs will help narrow down your list of potential providers.
This could save you a large amount of time in the future, allowing you to get started with your business project as soon as possible.
WHAT TYPES OF TERMS DO THEY OFFER?
This is something you simply cannot overlook. What is the annual interest rate? Are there any hidden fees or prepayment penalties?
Be sure to understand all of the associated costs and make sure the terms work for your business. For instance, some providers incorporate miscellaneous fees into their contracts that can quickly add up if you remain unaware of them.
Other providers might require collateral for high-value loans. The good news is that this can often come in the form of business possessions, such as equipment.
You should also note that just because an interest rate on a particular loan is high does not mean that it can’t be a great financing option. Short-term loans often have higher interest rates than others, and they are meant specifically for those who will be able to begin generating income shortly after borrowing from the lender.
WHAT TYPES OF BUSINESSES DO THEY SUPPORT?
Not all loan providers are willing to lend to every type of business.
Some may specialize in lending to small businesses, while others may focus on larger companies. You should also consider whether or not they tend to work with companies in certain industries. A restaurant, for example, might not be able to get a loan from a business that generally provides capital to tech firms.
Only choose a provider willing to lend to your type of business, as this could affect your chances of approval. The last thing you want is to spend an abundance of time filling out applications only to get denied.
HOW MUCH EXPERIENCE DO THEY HAVE?
Before you commit to a loan provider, it’s essential to consider the amount of experience they have in the industry.
Do they have any certifications or awards that demonstrate their expertise? Are they well-versed in the local business laws and regulations? The more experienced a loan provider is, the more likely you are to get a favorable outcome.
It’s also a good idea to speak to other business owners that you know. Chances are, they will be able to point you in the right direction.
CONSIDER YOUR REPAYMENT OPTIONS
As you might guess, the repayment terms are just as important as the borrowing terms. For example, some loan providers may offer flexible repayment plans that allow you to pay off the loan over a longer period of time. This could be beneficial if your cash flow isn’t steady or predictable.
Furthermore, some providers may have more lenient late payment policies or offer discounts for early payments. Knowing all these details ahead of time can help you budget correctly and ensure that you don’t fall behind on your payments.
This is crucial to keep in mind, as your loan repayment history could impact your ability to secure financing in the future. For context, let’s assume you take out a loan before you look into the repayment options. If you find yourself unable to handle it, lenders may be more apprehensive to work with you later on.
TAKE YOUR TIME
One of the greatest missteps you can make is rushing into the process. Don’t be afraid to take your time while researching so that you can find the best option. To elaborate, it’s not uncommon for people to spend weeks or even months looking for the right loan provider.
This becomes increasingly true when looking to borrow a greater amount of money.
KNOWING HOW TO PICK A BUSINESS LOAN PROVIDER IS SIMPLE
Although it may seem complicated at first, understanding how to pick a business loan provider is much easier than most people think. Consider the above info so you can make the best decision for yourself.
Looking for more information on what we can do? Reach out to us today to see how we can help.
