Applying for a business loan can indeed be more time consuming and challenging. Of course, you have not enough time to search through many options and contact every bank throughout the country. If you are virtually comparing your options in order to get the right business loan, asking the right question can make this lending process a whole lot easier. Here are 5 must ask the question before you apply for a business a loan!
How much money do I need?
This question is all about how much money you need not how much money you want. Applicants apply for the biggest loan as much as they get, but this method has some drawbacks. First of all, if you apply for the biggest loan amount, you are likely to be rejected because, in most cases, the maximum loan amount offer is reserve for the top-tier applicants. Moreover, small business loans have more interest rates and additional fees that the applicant must consider in total cost. In some cases, loan size determines the fee, which means bigger loans come with bigger fees.
What do you need the money for?
If you need to buy big equipment for your future company, you will want to get a loan or lease it. When you understand what you need the loan for, it let the lenders what kind of loan will be best for you. Moreover, it helps them to know whether line credit or loan would work for you.
What are the terms and conditions if I default?
When it comes to defaulting on small business, every lender behaves differently. For instance, a lender may wait for a month while the other may wait for two months after the missed payments. It is true that defaulting on a loan can be very stressful, but you can manage it easily when you understand the whole process. So, don’t hesitate to ask your lender about the terms and conditions in case of default. It’s about preparing for every consequence.
What is the interest rate?
If you know what will be the interest rate on your loan, it helps you to estimate the total cost of borrowing. This will give you an insight into how much you will pay to your lender and what will be the true cost of your loan. Once you know the exact interest rate, it will give you a benchmark to find your business loan’s competitive rate. This way, you can get the best-valued loan for your business.
What is the true cost of my loan?
There are some other additional costs, too, with interest rates when you borrow money for your business. Other charges and fees include valuation fees, stamp duty, application fees, and legal fees. If you ask about these additional charges before applying for a business loan, you can get a clear picture of how much your business loan will exactly cost you. This way, you can choose the option which suits you best.