It’s needless to say that business loans, no matter how small, can make a huge difference in your company. They can allow you, the businessman, to get those new computers your office really needs or muster the finances to hire some extra staff.
But do you know everything about business loans or do you jump headfirst in the first offer that’s presented to you? If you do the latter, you could end up in some serious trouble. Take some time to read the following list and you’ll be on the safe side.
Essential Information about Business Loans
- There are many types
There are online loans, installment loans, personal loans, etc. There are so many types of business loans that it would take us a month to explain them all.
Make sure you become familiar with at least half of them before you take one. They serve various purposes, so you can easily get the wrong one.
- They come with different interest rates
Simply put, the interest rate is the price you pay for the money you borrow. It can differ from lender to lender, as well as from type to type. Do not make the mistake of thinking a low interest rate is the best.
There are many variables you must consider. A low interest rate, for instance, could point out that you can’t borrow as much money as you need. It also hints towards a longer term.
- Banks aren’t the only lenders
There are the so-called “alternative lenders” you can talk to. Since they activate on the Internet, they offer quick online loans. Northcash Loans is one example of such a company. Before applying for online financing, though, you should take a close look at your financial prospects. Will you be able to repay the loan in time, or not?
Credit unions and private investors, too, can provide start-up business loans in a variety of forms. And here’s some good news: alternative lenders usually don’t care about your low credit score.
On that note, according to this source, alternative lenders approved 58.2 percent of loan requests, in comparison with big banks that approved only 24.1 percent of loan applications.
- They can be secured or unsecured
When a loan is secured, it’s tied to an asset that the lender can place a lien on to get his money back if you don’t repay the loan. An unsecured loan isn’t tied to an asset, but comes, subsequently, with a higher interest rate.
- Credit score is king
A low credit score can make getting a business loan similar to walking through hell. The higher your rating is, the higher your chances of being approved immediately. Can you still qualify for secured business loans with bad credit? Yes! Unlike standard business loans, loans with bad credit are carefully arranged so that a small business owner can make loan payments without placing too much strain on their cash flow.
- You must have a business plan
Not having one is synonymous with not knowing what direction you want your company to go in. This means you’re irresponsible and not a genuine entrepreneur. Pen out a proper business plan before you go to the lender’s office.
Business loans can be very tricky and dangerous if you don’t have an understanding of how they work and what could go wrong. This article is just the tip of the iceberg, so it’s highly recommended you do some research on your own.
This will prevent you from getting in some trouble you could have easily avoided by doing some reading.