In this article, we will give you the solutions to some of the questions you have while applying for a small business loan. There are more options available today than ever before.
The key to a great relationship between borrower and lender is communication and trust.
So, you need financing to get your business on track for success? Every business needs funding. In that case, small business owners do two things, they either go to banks or go to the small business lenders. Banks mostly don’t approve small business loans because it’s too expensive to underwrite small loans. In the end, we all know what happens next… hello internet!
Gone are the days when only the banks were the one-stop-shop for small business loans as those days are over. The trend has been captured by private small business lenders. Many small business owners borrow capital to fuel their hiccups in business. The right loan can save a sinking business to the shore but if a little mistake can sink the entire business. So, finding the right lender can make the difference between successfully using a business loan to create value in your business; or can add your business’ viability at risk.
At Bitxfunding, small business owners call us with queries about the loan process. Somethings wonders, what stands out is how many business owners ask about the basics of getting a loan. We at Bitxfunding help business owners answer important questions early-on in the desk, getting them up on the track of success when they do apply for financing. Before you get a small business loan, there are 9 basic questions you should ask from your lender.
1-Do you lend to businesses in my industry?
Some lenders have certain boundaries and limits to work with certain industries that have high default rates or questionable practices. Alternative lenders are experienced in that industry so asking them is a better option because it will save you time and at the same time save you from unnecessary inquiries on your credit report. Some business lenders specialized in working or have identified industries they won’t work with.
According to the Federal Reserve Bank of New York report last year, the small business owner spends 33 hours looking and applying for a loan and in that group, they valued their time at $170 per hour. If that time was saved, that 33 hours can be expensive in business and utilized. So, asking this very question early will help you save some of that very expensive time.
2-What are the interest rates and the total cost?
In order to assess and compare finance options, there are several different price and comparison tools. The annual percentage rate (APR) is one way of comparing loans, even though the total dollar cost of the loan should be considered. It is particularly true when comparing loans of various durations. This is true.
All fees are included in the APR calculation, so make sure that you compare an APR with a full APR instead of the annualized interest rate. As stated above, it’s also important to know the total interest cost, or the total cost of the loan for the dollar, along with the questions of interest rates and fees. For instance, your total dollar cost would be $ 1,500 if you borrowed $ 100,000 and your full payback $ 11 500. The dollar cost can help a company determine its accessibility and comparison costs with expected ROI easily.
This is one reason you wish to ask yourself this question before you meet a loan officer at the Bank or an online lender. your loans forced you to get informed about that decision.
3-What will my payment schedule be?
The advent of periodic payments every day, weekly and monthly is an exception to the more traditional monthly method of payment. Nonetheless, for a number of reasons, a more frequent than monthly payment schedule was adopted by many lenders. Not the least is that, instead of the traditional lumpy cash flow drain associated with a single payment every month, it tends to reduce the cash flow burden during the month.
It is important to make sure that your business has such potential to give a consistent cash flow to your lender throughout the month if your lender requires a daily or a weekly payment schedule. Such a schedule of payments might not be an appropriate choice for companies which rely on month-end cash flow.
4-When is my first payment due?
It makes sense to assume that your first payment is due at the appropriate time of the month after you take the loan. On the other hand, your first payment will likely be due on the following day after the acceptance of the loan process only if you have a daily repayment schedule. This could be an issue for the business owners who do not expect the first payment to be due but would be welcome if they know what they are looking for the better is to ask. These are the unexpected demands which can cause dismay.
5-How do I make my periodic payments?
While certain creditors still accept the paper check that the borrower sends to the lender, many lenders (even online creditors), by means of an ACH withdrawal from the bank account of a business is now automatically charged. This is a common practice that is very convenient for many business owners. This is an easy way for the creditor to collect payment for the loan quickly – a clear advantage for them. However, it could be considered good for the borrower for several reasons.
Make sure you know precisely what is debited with each periodic payment from your account. Is it fixed, or does it depend on what is on your account? It’s fixed. You will want to confirm that if you have a daily debit or not, your account will be debited daily or every day so that you can prepare yourself for it and make sure your business account has adequate funds to meet your debts.
You will also want to make sure you understand the process if there are difficulties, and if the periodic payment is due, there is not enough money in your account. A good lender should be ready to work with someone with an isolated problem proactively. You want the loan process to be as successful as you are.
6-How long will the loan application process take?
It might take from one or two days to a few weeks, or even months, depending on the lender. It may be that some of the lenders you are out early because your typical approval process takes too long, depending on how quickly you want your loan and the capital.
Fortunately, some lenders can make a quick decision to have money in your account sometimes as quickly as within 24 hours if you are approved.
7-What is your Better Business Bureau (BBB) rating?
That’s not the only way to learn how a company does business, but also how it solves problems. In addition to the BBB, don’t be shy about visiting a review site or two to learn
about the lender as much as possible.
8-May I speak to a few of your current and past customers?
It might be a good idea to meet with a or two customers, review any success stories they have, find customer testimonials and even look for feedback online. You may talk to several successful customers. Are the majority of reviews good? Are the same concerns reappearing? Do not hesitate to ask anything if something looks out of place. And don’t be afraid to look elsewhere if the lender doesn’t resolve your concerns.
9-Do you report my credit history to the business credit bureaus?
Your good credit behavior does not help you to construct an even stronger business lending profile if they don’t report. Some lenders don’t like commercial cash advance providers. Do not, therefore, assume that you interview the lender. When you look for a small business loan, this should be an important consideration.
In the process of borrowing, you will likely meet one of two different kinds of lenders. One is the “sell me your stuff” guy and the other is the professional financing company who seeks to help you find the best funding for you that meets either your financial needs or all of them.
In all this process you need to understand what’s best for you because your time is million dollars expensive. We have somehow helped you through the initial work, rest best of luck.