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Are you thinking about applying for a business loan? There are plenty of considerations to take into account first. Here, we give you a checklist to help with your planning.
At some point or other, the vast majority of businesses, whether large or small, will opt to secure themselves a business loan. While taking on debt can seem scary for small business owners, a loan can help you finance changes in your business that can result in a high return on your investment. There are other advantages too.
Moreover, a business loan will help your business grow. That’s because it will aid your business in running more smoothly and efficiently. However, there are a number of things to take into consideration before you commit yourself to a business loan. Here are some important ones:
Types of Business Loans
There are many different types of loans that are suitable for small businesses, as well as multiple variations of each of those types. For example, there are secured and unsecured business loans, invoice financing, merchant cash advances, commercial mortgages, and eBay loans, just to list a few.
Each of these funding options will provide you with something slightly different. Therefore, be sure to do your research thoroughly. For example, SME Loans can offer you both merchant cash advances and unsecured business loans. A merchant cash advance is fundamentally a funding option whereby you receive a sum of cash now in exchange for a percentage of your future credit card sales.
Choosing Between an Unsecured Business Loan and a Merchant Cash Advance
An unsecured business loan, on the other hand, is a loan that does not require any collateral from the borrower. This means you are not expected to secure the funding against your property or possessions.
Both unsecured loans and merchant cash advances are well suited to small business owners. Further, they each come with great benefits. For starters, they are both quick and easy to apply for. Moreover, you can receive funding in as little as 24 hours. And finally, the repayment plans are flexible and accommodating to the borrower.
However, they do vary from one another, like all types of business loans. So be sure to read further into each before deciding which is the appropriate one for you.
Your Current Financial Situation
While securing yourself a business loan will increase your cash flow and aid with the overall growth of your business, you should carefully consider whether or not it is something you can currently afford to do.
Therefore, review your recent sales figures as well as your monthly and yearly budgets. This will help you decide.
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It is also important to note that some types of loans are more expensive than others. For example, bank loans generally tend to have high interest rates. Meanwhile, other funding options, such as a merchant cash advance, tend to have much lower interest rates.
Whatever you do, though, make sure you only borrow an amount that you can realistically afford to repay.
Interest Rates and Fees
Interest rates are a factor that requires close attention regardless of which type of loan you opt for. These largely determine, along with other potential fees, the total sum you will have to repay.
So watch for hidden fees. These can include administration fees, credit report fees, processing fees, origination fees, appraisal fees, and underwriting fees. Make sure you read the small print to avoid getting deceived. And don’t be afraid to get in contact with the loan company directly if you have any questions about the contract.
Length of Business Loan
The length of the loan is another factor that will play a key role in determining your overall cost on the loan. Loans and other funding options have varying repayment systems and policies. Sometimes a slightly lengthier repayment period could benefit you, and sometimes it might not.
Getting the Best Deal on Your Business Loan
Once you have made the decision that getting a business loan is something you would like to do, or need to do, the next step is to ensure you are getting the best deal. You want to make sure you are opting for the loan type that is the most suited to you and your company.
So shop around on different loan websites, read online reviews, and use price comparison websites to help you decide.
A Final Word
With so many different types of business loans and funding options out there, it can be difficult to decide which one is best for you and your company. Take the time to do your research carefully and do not rush into anything.
SME Loans is a great place to start. What’s more, they helpfully give further information about the types of funding they offer on their website. Getting the right business loan can really help your company to move forward and develop, and is something you needn’t avoid.