Luckily, small businesses have more options than ever before for getting loans and finding ways to finance their companies. It can even be overwhelming trying to decide what loan option to go with or what option to pursue for financing. Depending on what the business is, some options are better than others. Ultimately, the decision must be taken on a company by company basis, but there are some questions a business can ask to help make this decision a little easier.
What’s the money for?
The first question to ask before applying for a small business loan is to determine what the money will be used for. Is it completely necessary to get the loan? How will the money be allocated? Even before getting the money, it’s important to determine how it’ll be used so it won’t be wasted.
How does the business’s credit look?
The status of a business’s credit is often pertinent to the amount and kind of loan the company can get. Businesses with any kind of credit can get a loan, but before applying for a loan, a company should find out what their options are and what loans they actually qualify for. If there’s time to improve the credit score before getting a loan, take steps to improve credit before applying for the loan.
How much money is needed?
Crunch the numbers and determine how much money is needed for the business’s goals. Avoid taking a loan out for more money than necessary, because it often means paying more in interest. Allocate all the money from a loan so none of it goes to waste.
Does the lender fit your industry?
When applying for small business loans, the company needs to do research and make sure that they lenders they’re considering working with have experience in their industry. Instead of taking time to work with and apply for a loan with a lender that doesn’t actually work in the proper industry, companies can do a little research and find the best lenders from the very beginning.
What’s the total loan cost?
As a company chooses the best loan for them, they need to take into account what the total cost of the loan will be. When working with a great lender, the lender usually gives those numbers upfront and is very clear about what the end cost will be, how the payment plan is organized, and what the interest rate is. Companies should feel free to ask any questions they have and can even try to negotiate lower rates.
What is the payment schedule like?
Once a business decides on a lender, it’s important to clearly understand what the payment plan is. When must payments start to be made? How often are payments made? What happens if there’s a late or missed payment? These questions are all important and can help companies decide on what small business loan they’d like to get.