When you’re ready to take out a loan to help fund your small business, it’s important to weigh the variables in order to make the best decision for your company. Here are four ways you can determine which financing option to choose.
Don’t automatically jump on the loan that offers you the most cash. Before you even apply for a small business loan, create a plan for how you’ll use the working capital and how much you’ll realistically need. Different lenders offer different loan ranges. There’s no sense in paying interest on more money than you need, so be sure your strategy is sound. Plus, lenders appreciate a good business plan in any loan application.
Your loan’s interest rate is important, but make sure you’re looking at all of the fees involved as well. Loan offers can be analyzed more easily by comparing the annual percentage rate (APR). This number includes your interest rate and fees on an annual basis to give you a better idea of the total cost of the loan. It's worth noting that most unsecured business loans don't pass the 12 month mark, so this number may be expressed differently than most APR's are.
While a long loan term may seem tempting because of lower daily or weekly payments, this could end up costing you more in the long run. That’s because you pay more in interest when the repayment period is spread out over a longer period. It’s definitely important to meet your short-term budgetary needs, but you also need to weigh in your long-term finances.
All lenders offer a different timeline for how quickly they can get you your loan funds after your application has been approved. Online lenders like us have the agility and technology to fund an approved loan within 24 to 48 hours. Traditional banks can take weeks and sometimes even months to move small business owners through the loan approval process. Think about what you need your funds for and when you need the cash in your business bank account before you make a final financing decision.
Getting the right small business loan can make a world of difference in the success of your company. Weigh your options carefully by considering these four factors as well as any other concerns that are relevant to your specific business.