When researching financing options, there are several factors to consider to narrow down your choices.
Loan flow
When small business owners need cash, they often need it quickly. The last thing you want is to be stuck with a financial institution that requires a lot of paperwork or takes too long to transfer funds to your bank account. There are many alternative lenders out there, and it only takes a few minutes to apply for a loan, and some can even provide same-day financing if approved.
semester
This term refers to the repayment period of the loan and the schedule for when payments must be made. For example, for a short-term loan, it may take 6 months to repay, and for a long-term loan, it may take 5 years.
qualification
Qualifications vary by lender, but generally consider your credit score, the financial health of your business, and how long you've been in business. Some lenders only work with borrowers with very high credit scores, while others are open to more risky borrowers. You should understand the qualifications of a particular lender and know what you are eligible for before applying for a loan with that lender.
collateral
Some loans may require you to provide personal or business collateral, such as paper assets such as stocks or bonds, or assets such as buildings, equipment, or vehicles. If you default on your loan, your lender may ask for your collateral. It's important to understand the lender's collateral requirements and inherent risks before agreeing to terms.
Fees/repayment
Interest is not the only fee you pay back to your business lender. Lenders may charge various fees that affect the cost of your loan, including application fees, origination fees, late fees, prepayment penalties, and monthly and annual maintenance fees.
Time to deposit
This is the amount of time it takes from the time your loan is approved until the money is deposited in your bank account. Before choosing a lender, you should get an estimate of how long it will take to get your money back. Some alternative financial institutions can transfer funds to your bank account within a few business days.
special document
Some financial institutions will require you to provide documentation before proceeding with your application. These include corporate financial statements such as the balance sheet, income statement, and statement of shareholders' equity.
Lenders may request three months of checking account statements. You'll also need to submit your income taxes for the past three years, documentation of any business you have a financial interest in, and any business licenses or certifications. If you rent office space or equipment as part of your business, you'll want to have easy access to those leases as well. Knowing in advance what documents your chosen financial institution will require (ideally, having them gathered and prepared before you start your application) will help ensure a smooth and quick process. The process is guaranteed.
Most small business loans require you to provide a personal guarantee. This means that if your business defaults on the loan, the lender could go after your personal assets.
For more information on business loan terminology, please visit our business glossary.
