Costs vary significantly depending on the lender, but you can usually find out the cost structure before submitting the application. Some lenders charge interest and others charge factor fees, where interest is not compounded. Most non-bank lenders charge their rates daily, while banks will charge an annual fee. You may have to pay an establishment fee. You can usually pay before the set date without penalty fee.
How long will I have to pay my loan?
The payment terms differ depending on how much you borrow and with which lender you get involved. In general, you will have between a few months to a couple of years to pay off a loan from a non-bank lender. Generally, banks offer longer periods.
Will my personal credit history be modified, or only the company’s credit file?
The lender will specify which credit history they will need to verify, but, in general, it will be your personal history that must be verified. Your company’s financial data can also be verified using the accounting information.
What is the difference between a fixed term loan and a line of credit?
A fixed term loan will provide you with a lump sum when you are approved for the loan and the repayments will be arranged so that the loan is repaid at the end of the terms of your loan. A line of credit is where you are granted a certain limit that you can set and include according to the needs of your business. Some lenders may approve a limit but will not charge if you decide not to use it. As you repay the line of credit, the funds will be available for you to reuse.
Is there anything you should avoid?
Do not apply for business loans until you can present a good case to the lender to prove your profile as a borrower. You will be asked to show the finances and cash flow of your business. Make sure you have reviewed the minimum criteria for the loan and that your business meets them: if you are not sure, check it directly with the lender.
“My business loan application was not approved.” Now what?
There are several reasons why a business loan application can be rejected, and it is important to ask your lender for feedback if this happens.
This feedback will help you know what you did wrong, and what you can improve for the next time you submit an application. If the lender cannot provide these comments, you may want to review your application and see if you can detect any irregularities.
Common reasons may include: negative credit history, cash flow problems, insufficient security or simply not meeting the lender’s criteria. Before resubmitting the application, be sure to compare your options thoroughly so that you can submit an application to a lender that meets your needs and adapts to your financial situation.