3 Things to Consider When Seeking a Business Loan

Did you know the average rates on business loans range from 2.54% to 7.01%?

If your business needs a loan for whatever reason, there are things you should know beforehand. Whether to fund the next growth phase, invest in product development, or do other things, your business may need to access capital, including exploring online loans.

But remember these three things when seeking a business loan.

Business loan

1. How Much You Need

It’s essential to figure out how much money you require. And that entails realistically assessing your company’s ability to make monthly payments without running into trouble. So, while you might need $250,000, it’s vital to consider how much cash flow your company brings in every month. Will you struggle to pay back the loan? If so, seeking a smaller loan instead might make more sense.

Do your homework and decide how much money you need for your business.

2. The Terms

When considering a business loan, comb over the terms and read the fine print. Look at the loan amount, the interest rate, the pay-back period, late payment penalties, and more. Some lenders offer better terms than others, which is one reason you should look around. Don’t just take the first offer you get. That could be a mistake that costs you over the life of the business loan.

It’s also vital to consider how your credit score impacts whether or not you get a business loan. Depending on your credit score, lenders could offer you a loan with good terms, offer you a loan with less favorable terms like a higher-than-average interest rate, or reject your business loan request. So, your credit score matters.

If you check your credit report and find inaccuracies that drag down your credit score, file a dispute with a credit bureau. That should do the trick. But if efforts to get credit report errors removed are unsuccessful, you might need to contact a lawyer. Doing so is the best option if a credit bureau digs in its heels and refuses to act in good faith —  a lawyer can get results.

Taking loans

3. Type of Business Loan

When seeking a business loan, you’ll have different options on the table. An obvious place to start is a bank or credit union you already do business with. If you have personal accounts with a bank or credit union, consider options to secure a traditional bank loan. You might get a better interest rate if you get a traditional bank loan over some other ways to secure a business loan.

A Small Business Administration (SBA) 7a Loan is another option. The SBA guarantees business loans will be repaid — which is a plus for lenders. But getting such a loan requires clearing more hurdles than seeking a loan through a traditional bank. If you don’t want to go through a stricter and more time-intensive process, a traditional bank loan might be best.

Among the other options include term loans, such as a short-term loan. Such loans are usually available from $5,000 to $250,000. They’re used to cover smaller projects — and the pay-back period usually goes from three months to two years. If you need a business loan and need it fast, a short-term loan is worth considering since approval can come in as little as a day.

Another term loan is a medium-term loan, and it’s a good option if you need south of $500,000 relatively quickly for a business expense. You’ll usually get 24 to 60 months to repay the loan.

A business loan might be the best option if your business needs funds. Ensure you consider your options to get the right business loan at terms acceptable to your company.