Small Business Loan Terms You Need to Know
When shopping for a small or start-up business loan, most applicants find that there are different loan terms that they need to evaluate before they can finally get approved. Various small business loans possess different terms and features such as interest rates, fees and charges, payment arrangements and others. And to get the best small or start-up business loan possible, consumers must understand what each term and feature mean. This way they can be guided in choosing and in negotiating for the loan program that they found suitable to their needs and finances.
So to help our readers, we have provided a brief discussion on the different terms and features that consumers will definitely see in their respective loan programs. By understanding what these terms mean, we can empower our readers to effectively negotiate their ways into getting approved for the small business loans they desire to get.
Common Business Loans Terms and Features
1.Repayment period – The repayment period represents the date when your small business loan must be completely paid off. Should you fail to come up with sufficient fund to settle your credit account, you may be required to pay penalties and additional charges. So, you have to make an educated estimate when you will be able to repay your small business loan. Make sure that you request a reasonable amount of time to settle the credit account you intend to apply for.
2.Late Charges – These are the penalties or additional charges that you need to pay should you fail to completely settle your small or start-up business loan on the agreed-upon due date. And since the world of entrepreneurship and finance are both very unpredictable, it will be wise to negotiate with your potential lender for a reasonable late payment fee.
3.Collateral – Collateral is the asset that you provide to a lender to secure your small business loan. In case that you default on your payments, your lender can seize the property you have submitted as guarantee for your loan and sell it to settle all your unpaid charges. So, before submitting any of your assets to secure your credit account, make sure that your payment plan will really allow you to completely pay off your small business loan. And it will also be good to devise contingency plans that detail how you intend to retire your loan, should your business fails to generate its expected profits.
4.Prepayment – Prepayment is the term used to describe the fees or charges that a consumer must pay should he decide to settle his small or start-up business loan before the end of repayment period. The reason why a consumer will be charged with a prepayment fee is that the chosen lenders will not be able to generate as much profit on interest as it should since the borrower decided to pay off his loan way ahead of the agreed-upon date. So, before taking a small business loan, make sure that you ask your selected creditor whether or not it charges prepayment penalties. If it does, be sure that you know exactly how much you will be paying your lender should you decide to pay your loan ahead of schedule.
5.Interest Rates – These rates represent the price that a borrower must pay for the use of the money he borrowed from a lender or from a credit institution. Most banks today normally charge an interest rate that range from 6% to 9%. So, as you shop around for different credit accounts, make sure that you only settle for the credit program that carries the most affordable interest rate. This way, you will not lose a great deal of your money making payments on the interest charged on your small business loan.
6.Fees and Charges – These are additional costs that business owners must shoulder to get approved for the small or start-up business loan they need. Some of these charges may include processing and administrative fees, property appraisal and even attorney fees. Thus, before taking a credit program, make sure that you know all the fees and charges that you need to pay. And settle only for a program that features the least number of fees, penalties and charges and that will not impose hidden costs.
Familiarize yourself with these business loan terms and features and we guarantee that you can find and negotiate for the best business loan that you can use in building your dream business or in supporting whatever needs your business may have.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2010.
Related Article: Borrowing Money To Build Your Business
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