Top 7 Factors to Consider When Picking Business Loan Providers
Do you know that alternative lenders have much higher approval ratings for business loans than big banks? Interestingly enough, you’ll find that the smaller the financial institution, the higher your chances of getting accepted.
But, that doesn’t mean that properly picking business loan providers is easy. After all, there are so many of them available on the market, and not all of them are made equal. So, if this is your first time doing some research on the topic, don’t worry. We’ve got you covered.
Keep on reading for our top seven tips you can apply to your search for the perfect business loan provider.
1. Picking Business Loan Providers 101: Understanding Your Eligibility Options
The very first step in setting a plan for getting a business loan is tackling the eligibility requirements. After all, you can select a loan to apply to, but that doesn’t mean that you’ll get accepted or that you’re eligible to apply in the first place.
While SBA loans are notorious for their strict loan borrowing requirements, you can check out alternative lenders of small business loans. Those tend to come with varying requirements, and they’re more than willing to take on riskier clients, like those with lower credit scores than average.
2. Select Your Type of Loan
Once you’ve figured out the broad strokes of the eligibility requirements, you can start thinking about the type of loan you actually want.
There are personal loans, SBA loans, and many other types of structured loans. Also, instead of going the route of a traditional loan, you can get a line of credit for your business.
With will provide you with a specific dollar amount, and you can spend it according to your business needs. In short, you’ll want to explore every type of loan available to you. This way, you can make an educated decision on which type of business loan would best meet your needs.
3. Consider the Monthly Payment Amount
Don’t wait for your lender to decide whether you can comfortably afford the monthly payment on your loans. You’ll want to have a range in mind of what’s considered a comfortable payment to you before you start your negotiations.
And, when in doubt, pick the conservative approach. So, you’ll want to take the least amount of debt to meet your business goals. We know how tempting it can be to max out your loan amount. But, this will cost you more money later down the road, so please don’t do it.
Take stock of your essential cash needs, then put a number as your goal.
4. Compare Different Rates
This is the time to shop around.
If you’re already feeling stressed about getting a business loan, it might seem easier to just sign up for the first loan you find. But, that doesn’t mean that it’s actually the best business loan for you, in terms of both the rates and the term of the loan.
You’ll want to compare the different rates as given to you by various lenders. This way you can grab the one with the most favorable rates. You can always check out lenders that base their acceptance decisions on a business’s payment history, performance metrics, and even industry risk scores. This means that they’re collecting accurate data instead of relying on the flimsy assumptions given by your credit score rating.
5. Check Out the Lender’s Credibility
Any business owner will emphasize the importance of doing your due diligence, especially before signing any legal documents. This rule applies to picking the right lender for your business loan.
You’ll want to pick a provider with a high level of credibility. Start your search with online reviews, and try emailing them a question or two. This will help you gauge their customer service quality.
For instance, is there a grace period when a client is late on a payment, or are they automatically charged? Another concern is the possibility of refinancing in the future so that you can get lower monthly payments or better interest rates.
6. Confirm Your Lender’s Range of Lending
In short, can your lender offer you enough money to meet your needs?
There are many different lenders on the market that might be delighted to give you a loan, but not all of them will be able to give you a big bulk of money.
Generally speaking, you’ll find that small business loans can range from $5,000 up to $5 million. You’ll want to keep a specific figure in mind and see if your preferred lenders can give you that much capital.
You don’t want to go through the whole process more than once, with different lenders. All because you couldn’t get sufficient funds from the first one.
7. Response Speed of Lenders
Sure, any loan agreement will come attached with some bureaucratic strings. Yet, that doesn’t mean that there aren’t lenders that are faster than others.
As a business owner, you’re probably looking into business loans because you need an influx of cash as soon as possible. If that’s your case, then you’ll want to give traditional banks a pass for now. Those tend to take around 60 to 90 days for your loan to come in.
On the other end of the spectrum, alternative lenders are known for their same-day approvals and minimal paperwork. So double-check your timelines and the approval period you’re comfortable with, before starting your application process.
Loans for Business: Unlocked
Running a small business is not a job for the faint of heart. Yet, getting access to additional business funds shouldn’t be an exercise in frustration.
Hopefully, our explainer has shed some light on the key seven ways that will ease up the process of picking business loan providers. When in doubt, remember to always reach out to your potential providers with all the questions you might have.
And, if you enjoyed our article, make sure to check out additional tips and strategies, all available to you in the finance and business sections.