What to Look for When Comparing Small Business Loans?

What to Look for When Comparing Small Business Loans?

When comparing small business loans, you should first create a checklist or you may end up making a bad choice. While the interest rate or funding speed is important, other aspects like the associated fees and charges that can add a significant amount to the total cost. So what are the other key aspects to look for? Let’s find out.

How do you Compare Small Business Loans?

When researching small business loans, you need to be mindful of your ‘why’ for getting the loan and ‘what’ you need to qualify. Before you sign up, consider the following aspects:

The amount you need:

Most lenders in Australia will finance small business loans of a minimum of $5000 to $500,000 while some will go up to $5 million. Check whether the lender you are considering offers the loan amount you need.

Impact on cash flow: 

If you need to make a one-time, big-ticket purchase, a business loan can be the best option. However, if you need financing on a long term basis, then a line of credit may be a better bet.

Business maturity: 

You should have been in business for at least 6 months and have stable revenues to qualify for a small business loan.

Business Loan Comparison Checklist:

Business loan interest rates and fees

Interest rates can vary widely from lender to lender. Some might have weekly or bi-weekly rates while others will calculate interest on a monthly or yearly basis. These rates will vary based on whether the loan is secured or unsecured, the lender’s credit policy, etc. 

Fees and charges:

There are standard fees for application processing, early repayment, late payment, and loan settlement, etc. It is important that you ask for a complete fee schedule upfront to avoid surprises later.

Extra repayments: 

Check whether there are additional fees for extra repayments. In some cases, the interest you save could even be offset by the repayment fee. So this is one factor you should pay close attention to.

Flexible repayments: 

Depending on the industry you are in, cash flow can be erratic at certain times during the year. With a flexible repayment schedule, you can defer payments during the slow months and get caught up as cash flow beings to improve.

 

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