5 Must Ask Questions before You Apply for a Business Loan By Steve Maleh
If you are not prepared to apply for a small business loan, you may feel like an ordeal. Until applying for a company loan to help you plan and put your best foot forward, here are five questions you should ask yourself.
Taking the time to properly analyze and train yourself before meeting a lender may not be a guarantee of success, but it will allow you to boost the chances, so make sure that you consider the following:
1. Why does my business need financing?
2. What are the minimum funding conditions to qualify?
3. When I apply, can the lender make a hard pull on my personal credit?
4. What are the gross capital costs, interest rate and APR?
5. Does this lender make my good credit report?
Before you make a final decision, asking yourself these questions will not only help you plan for your query, it will also help you make decisions about any future lender. Continue reading, to know more.
When you are considering applying for a business loan, there is a lot of decisions to make. It can get complicated, daunting and damaging to your personal reputation if you're not careful.
So, before you submit any applications with potential small business lenders, I want to share these 5 important questions with you before you even start the application ... and why you should ask them.
1- Why is it that my business needs financing?
Your financing intent will decide many of the factors that affect your decision-making. If you know what you need to fund your business, you'll be able to answer many of the other questions you'll need. The cause, or intent of your loan, will decide how much you need, whether you should choose a term loan or credit line, what payback options your cash flow can manage, and how quickly you need the money, are just a few of the many other factors that will influence your financing decisions. These answers will help you get to the best financing options for your business.
2- What are the minimum requirements for financing your business?
Knowing the minimum conditions for a loan will help you narrow down the lending choices for which your business is likely to apply. This will save you time and energy before filling out applications even get started.
3- Should the lender make a hard pull on my personal credit when I apply?
An investigation into your personal credit background is part of any financing application. Some lenders, like OnDeck, can determine your creditworthiness by making a "soft" pull that doesn't show up on your credit profile and doesn't affect your personal credit negatively.Some lenders do, however, make a "hard" pull on your personal credit, and it's reported on your credit report, which can be detrimental to your personal reputation and your ability to apply for funding elsewhere.
4- What are the gross capital costs, the interest rate and the APR?
If a lender provides financing for your company, they will show you the rates associated with your loan. Many borrowers and business owners concentrate only on the APR (Annual Percentage Rate) or AIR (Annual Interest Rate), so you can always inquire about the overall borrowing costs so that you can see exactly how much you are paying back.
Some annual rates (APR / AIR) can look confusing for strong short-term loans.
Have your lender explain your cost as cents on the dollar (you pay back 7¢ for every dollar borrowed) or as the total cost of the loan. (will you pay back $11,000, $12,000, or $13,000 for a $10,000 loan). These estimates, in addition to APR or AIR, make it easier to understand the true cost of the loan and enable you to make the best financing decision for your company.
5 – Is this lender going to disclose my good credit background to the related business credit bureaus?
Some online lenders do not disclose your lending and payback habits to major credit offices. If you want your good payback habits to have a positive effect on your creditworthiness for the future and construct your business credit, confirm that any lender you take to the correct business reputation offices from disclosing their loans.
Author Steve Maleh
A seasoned businessman and 3rd generation entrepreneur, Steve Maleh has founded and started dozens of businesses over the past twenty years. From retail, to restaurants, to technology, several of which were sold, and several of which are multi-million dollar operations today.
Prior to his venture into the mobile space, Steve used his Architectural degrees to build, develop and renovate over 30 million dollars in real estate.
In addition to his own businesses and ventures, Steve has been actively sharing his expertise and knowledge with other entrepreneurs. Acting as an angel investor in several start up retail businesses.
Steve Maleh holds a Bachelors degree in Architecture and entrepreneurship from the University of Miami, and has also taken master classes at Columbia University in real estate developing and entrepreneurship.
Steve is currently looking forward to being part of the future innovation in the theatre application market with the launch of his new technology venture SNAX®.