When an opportunity comes along to take your small business to the next level, there has to be a way to finance the strategy. If you don’t have assets tucked away that you can draw on, the only reasonable thing to do is look for a small business loan. Rather than going with the first deal that seems to be decent, it makes sense to compare best small business loan lenders and the type of financing they are willing to provide. Make sure these four essentials are included in any loan arrangement that you select.
Experience With Other Companies Within Your Industry Type
Does it really make a difference if the lender you select has offered financing to similar companies in the past? The answer is yes. That lender will know a bit about your industry, including the potential seasonal increases and dips in collected revenue and business volume. Depending on your place within that industry, the fact that your lender has a better idea of what to expect could pave the way for locking in slightly better terms.
Options for Different Types of Collateral
If your company is established and has excellent credit, you may be able to negotiate an unsecured small business loan. That means there’s no need to pledge any type of asset as collateral. If the business credit score is not that great or you are still in the process of establishing one, do expect to pledge something for collateral.
The lender you want to work with is one that’s flexible in terms of the type of collateral you can pledge. Some will be open to accepting major machinery or equipment as collateral. Others are happy to secure the loan using some type of real estate. You may even come across a lender who is willing to utilize your Accounts Payable as the security. A lender who is willing to accept a wider range of assets is one that will be easier to work with overall.
The Interest Rate and Repayment Terms
Always pay attention to how much the loan will ultimately cost you. That includes any up front fees that are bundled into the total amount financed. You also want to know if there are any fees for processing loan payments or maintenance charges for keeping the account open while you retire the balance.
Doesn’t the interest rate matter? Absolutely you want to look for the most competitive interest rate. However, you may find loans with slightly higher interest rates but considerably fewer fees up front or recurring during the life of the loan. By projecting what you will ultimately pay for the loan, it’s easier to see which offer is the most cost-effective.
Reporting to the Major Credit Bureaus
Whether your business credit score is great or needs some improvement, always deal with lenders who report to the major bureaus. Timely payments will maintain and even increase a score that’s already quite good. If you’re looking for a way to increase a score that’s on the low side, it’s hard to beat timely payments on a small business loan. By the time you retire the debt, making all those payments on time are likely to boost your score by a noticeable margin.
Remember that not all small business loans are alike, and not all lenders structure their terms and conditions in exactly the same manner. Even if an offer looks good on the surface, delve a little deeper before making any commitment. In the long run, you’ll be a lot better off.