When running a business, it is more than likely that at some point you will need a loan. This may be a short-term solution to cash-flow, a means to buy new equipment, to fund the expansion of your business or to break into new markets, or to refurbish parts of your business.
Business loans are available in a wide range of sizes and formats, and it can be quite difficult to choose the right loan for your business if you are not familiar with the way the financial market operates. To ensure that you choose the right loan, here are some tips to consider from one of Australia’s most awarded lenders, Mortgage House.
How much money do I need?
It may seem obvious that you need money; otherwise you would not be considering taking out a loan. But there is no point in borrowing more money than you need, as you will end up paying back more and paying more interest too. But make sure you borrow enough, by assessing your needs carefully and planning for unexpected situations.
What type of loan do I need?
Business loans are available in many different formats, and some are better for one type of requirement than others. This is where speaking to a financial adviser may come in handy, as they may know of options that you have not considered. Secured and unsecured loans, loans from financial institutions, loans from online lenders, peer to peer lending, overdrafts, even considered use of credit cards can provide you with access to finance.
How soon do I need the money?
If possible, make sure you plan well in advance. Lenders are often suspicious about loans that are required urgently, and payback terms may be less beneficial. This is not just because they want to make money from you, but to cover some of the increased risks they perceive. Also, you may be more inclined to accept the first offer you receive if you are desperate, rather than compare offers.
How long is my repayment period?
Different types of loan can have different terms of repayment periods. Even though it may seem daunting to enter into a loan agreement for several years, the lower cost of interest and the smaller monthly repayments may be more suitable for your business. But if you are certain that the money is only required for a short period, then it makes sense only to borrow when needed.
Research the lenders
Many business owners will automatically turn to their current bank or mortgage provider when looking for a business loan. But with the many types of lenders available today, you may find a better offer online or through a lending institution that specialises in your particular type of business.
Review your credit report
Any lender will do their due diligence, so make sure you check your credit reports. You may be able to clear up some blemishes from the past, and knowing your score will also give you an idea of how likely you will be to be accepted for a business loan. A low credit score may mean that you will be looking at higher interest rates.
Sort out the paperwork
Lenders will more than likely want to see financial statements, company accounts, evidence of other business finance that you already have, and so on. Make sure you are prepared for this and have information available. If you can show forward bookings or enquiries, that may also help your case.
Make a business plan
Show possible lenders that you have done your homework and provide them with a thought-out, costed and researched business plan if your loan request is for buying new equipment, expanding your business or stepping up your marketing efforts.
Check your online presence
These days, the first thing many people do when they hear about a business is to check them out online. Review your website, Facebook page and other online presence and make sure you present a professional profile. Lenders won’t want to see bad online reviews or complaints that have gone unanswered, but positive comments and a good track record can sway matters in your favour.
Compare offers carefully
Business loan offers can be a bit like buses; once you see one coming along, more will probably follow! And even if you get just one offer, make sure you scrutinise the small print to make sure you are aware of all the conditions, such as possible penalties for missing payments or for trying to pay back your loan early, or rates changing after an initial period.
Want to know more about the possibility of getting the right loan for YOUR business? Then simply go online or call the team at Mortgage House. Their expert lenders will talk to you, explain the options, and offer advice, all without using financial jargon.