A reliable way to get some extra capital for your business is a small business loan. Whether it’s for covering your startup costs, or it’s to fuel a new initiative, getting a small business loan is both exciting and nerve-wracking.
It’s important to pay attention to the type of loan you’re getting into, if you aren’t careful, you could end up with something that’s almost impossible to pay back.
Interest Rates
Obviously, you want the lowest interest rate possible, but the interest rate you get will depend on a few factors. Your credit history and the terms of the loan you’re seeking to get are the main ones. I
f you want a lower interest rate, you may have to sacrifice some other preferences to compensate for it.
Terms of the Loan
If you’re thinking long-term, or if you don’t have an existing stream of revenue to help you with the monthly payments, you might consider the longest term possible, ranging many years into the future. However, do be aware that paying off your loan early can result in a prepayment penalty – so remember to pay attention to that in the conditions of the loan.
Expansion
If you’re looking to invest in expansion, you may me tempted to get the most amount of money you qualify for; after all, having access to more capital gives you more flexibility, and will save you time if you need to borrow more down the road.
Always start by outlining the fundamental costs that you’ll need to cover for your business. Don’t just guess, do your research, talk to your peers and calculate your best guess for what these needs will cost you.
Financial Institution
Of course, you’ll want to go with the provider that can offer your business the best deal, but the working relationship you’ll have with the loan provider also matters.
If you already have a history with one institution, it may increase your likelihood of getting a better deal with them in the future, so be sure to take that into consideration when deciding your line of credit, loans, and checking accounts.
After these steps, you should start meeting with different lenders in your area and see what they have to offer.
Just remember to read the fine print carefully, and only move forward when you’re confident about the long-term benefits of your decision.
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