Taking out a business loan is a great way to get the funds you need quickly – whether you need the money for unexpected bills, marketing your new weed blog, or even for building a team or buying new equipment, there’s certainly a lot of options out there for securing the cash that you need.
Before you go for the first company, though, it’s important that you do your homework when it comes to loans, so that you can get the best deal, and also ensure that you don’t actually end up in debt as a result of taking out the loan in the first place.
In this article, we’re going to walk you through the things you should take into consideration before applying for a business loan – let alone taking one out.
Shop around as much as possible:
All you have to do is type in “loan” as a search into Google, and you’ll be shown an endless amount of links offering you “the best deal”, but as with everything, you shouldn’t just take the first thing that shows up, because a lot of the time, things aren’t always what they seem.
There are many websites that allow you to compare different business loans, so you can always get the best deal based on your circumstances, because loans are not a cookie-cutter solution.
When searching for a loan, one of the most important factors to consider is the APR (Annual Percentage Rate) – this is basically considered to be the real cost of a loan when all is said and done, and includes things like interest on the loan.
So, although you may see a loan that offers low monthly repayments, upon closer inspection, the APR could be very high.
You’ll typically find that your bank will offer a very low APR, usually under 5%, whereas payday loan companies will be extremely high, anywhere from 50%+ and independent loan companies will be somewhere in the middle.
However, this is just an average, and it doesn’t mean that you’ll alway get the best rate from your bank, so if you’ve gone to them for a quote first, make sure you shop around for other quotes to see if you can get a better deal, not just in terms of APR, but also in re-payment terms before you decide which provider to go with.
Read the fine print:
This obviously applies to any kind of contract you sign, but especially so when you’re making yourself responsible for paying back money.
Reading the fine print isn’t just something you need to do when taking out a loan – it’s something you should be reading even before taking it out to make sure you’re actually eligible, because if you apply for a loan believing that you’re eligible and then get rejected, it can have a negative effect on your credit score, which can cause you problems when applying for other loans down the line.
For example, you may come across a great advert for a loan with a really low APR that seems totally affordable.
However, when you look closer at the fine print, you’ll see that it’s only open to existing customers who hold a current account at that bank, or credit card holders at that company who have used it within the past 6 months at a specific retail chain.
Although it’s definitely possible to get yourself a good deal when shopping for a personal loan, reading the fine print is definitely important.
Consider the cost of early repayment:
Although it may seem counterintuitive, many companies will charge you for paying off your loan early.
The reason for this is due to the company losing the interest on your payment, so if you pay back your loan two months early, then they’ve lost two months interest, which can be a good chunk depending on the loan amount and the APR.
When you’re taking the loan out, it’s a good idea to consider if you’ll possibly be looking to pay your loan back early.
If so, then looking around for a loan that offers either a flexible repayment option or no penalty for early repayment is a good idea.