Things you should know before applying for a business loan
A business loan can give you the support you need to fund growth or temporarily relieve cash flow pressures. These are some things to know before applying for the loan:
Understand the purpose of your loan: You should be sure about why you want a loan and what you will be doing with the loan.
What loan amount do you need: Realistically calculate how much money you need and how you’ll be allocating it to your needs
What can you afford to pay: Consider the length of the loan, payment options and other details before you apply. Think about what you can afford to pay so that you can discuss which of these features can and cannot be adjusted to suit your needs.
Secured or unsecured loans: A secured loan means that you provide an asset for the loan, your interest will be lower than for an unsecured loan and the lender may be able to sell your asset if you are unable to pay the loan. An unsecured loan means that you don’t provide an asset so that the interest rate is higher. It may be difficult to get approved for an unsecured loan.
Fixed or variable interest: If you are confident that you can meet the repayment requirements even if the rate increases but a fixed rate makes it easier to manage your cash flow as all your repayments are the same.
Fees and charges: The true cost of any loan is only apparent when you take into account all the additional payments that are incurred. These could include early repayment fees, exit fees, valuation fees (to secure your loan), etc.
Paperwork: Planning your paperwork ahead of time will make it easier for the lender to approve your loan, this will also make the entire process faster.
Consider speaking to an expert: You may want to discuss with an advisor about whether a loan might be the best option for you and what alternatives are available if any.