Tweet
Business Loan Issues You Should Not Miss
Many business owners finance their expenses through the help of business loans. Are you thinking about acquiring a small business loan too? If yes, consider these important issues which can have an effect if your future obligations.
Repayment period. You may choose a 10-year or 20-year repayment period, depending on your lender’s terms and the amount of the loan. A short period will enable you to save on monthly interest rate fees in the long run but the monthly payment would of course be higher. It’s important to choose just the right length of repayment which will enable you to save money and keep up with your payments at the same time.
Rate of interest. The lending laws vary from State to State and you should make sure that the lender you’re dealing with abides by these laws. However, banking institutions are not covered by usury laws so you should do extensive research and comparison to find a reasonable lender.
Don’t forget to understand how the rate is calculated. A variable-rate business loan may be attractive because the initial rate is low. However, keep in mind that a variable rate will increase depending on the Prime Rate. On the other hand, a fixed-rate business loan gives you assurance that your monthly loan fees will remain the same from the start until the end of the repayment term.
Other loan fees. Don’t forget to consider the rest of the fees associated with your small business loan. For example, get to know the exact processing costs, pre-payment penalty, late fees, and others. Examine your loan Agreement to make sure that there are no hidden fees.
Special Conditions and Provisions. You should also understand your lender’s terms when it comes to specific circumstances. For instance, what will happen if you default from your loan payment? What is the lender’s definition of default? How many months should you miss before your account is considered delinquent? What can you do to turn the situation around or avoid being penalized?
Co-signer Agreement. If the lending company requires a co-signer, can you find a co-signer who will be willing to guarantee the loan for you? Does your co-signer understand his/her obligations in case you fail to pay back your business loan?
Grace period. You should request for a sufficient length of grace period so you can avoid late penalty fees and protect your business credit history.
Loan Security or Collateral. A small business loan is usually a secured loan or a loan that requires collateral. Do you have an asset or property to submit? Do you understand the possible risks if you fail to submit your loan payments on time?
Irish Taylor is a business loan consultant with business start up 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 small business loan and new business credit.
Copyright 2011.
Related Article: Borrowing Money To Build Your Business
Click Here for SBA Loan request