What you should know about business loans
Ready to take the plunge and start your own business? Maybe you’re looking to expand and grow? Or you just need extra cash to invest in some new equipment? Before you sign on the dotted line, The Credit Savvy Team have put together a few basics you should know about business loans.
What’s the loan for?
One of the first questions a potential lender will ask is, “What’s the loan for?” The purpose of the loan can affect the type of loan you ultimately apply for. Do you need a stock standard loan? Maybe an overdraft facility is more suitable? Do you need equipment finance? The type of loan can also help you narrow down the lender as some lenders specialise in certain types of business loans.
How much do you want to borrow?
Much like home loans, business loans often have a minimum and maximum loan amount. It’s important to make sure the loan you apply for meets your specific borrowing needs. The loan amount may not necessarily be straightforward. Here are a few things you should consider:
- Do you already have savings set aside to cover some of the costs?
- Are you planning on using future sales/income to fund part of the loan?
- Have you budgeted for unexpected costs?
How soon do you need the money?
Speed often comes at a cost. If you need your funds within a few days, you’ll find that the costs are often greater than if you choose to go with a lender that funds your loan in a few weeks. It all comes down to your individual circumstances, how urgently you need the funds, and if the loan suits your needs overall.
What’s the interest rate?
This seems pretty obvious, right? Make sure you know the interest rate! If you choose a variable rate, consider if you can still make the repayments if rates rise. If you choose a fixed rate, find out if there are any fees or costs with making extra repayments and paying off your loan early.
What are the fees?
Knowing the fees and charges associated with your loan is important so you can understand the true cost of the loan.
Here are a few you should look out for:
- Establishment or applications fees
- Valuation fees
- Legal fees
- Ongoing fees
- Early repayment fees
- Exit fees
Do you have your paperwork and documents ready?
Each lender has different requirements. Before you submit your application, find out what information you’ll need to provide so you don’t get delayed during the review process. Here are a few things you might need to provide:
- Financial statements
- Proof of individual income
- Bank statements
- Business plan
- Cash flow projections
Ready to start comparing business loans? Head over to our Business Loans page to get started.