Questions You Need to Ask Your Online Lender
Many small business entrepreneurs use borrowed money to finance expansion and other business goals. Finding the appropriate lender, in addition to the correct loan, might be the difference between effectively employing a business loan to add value to your company or risking survival of your company. The five questions listed below will help you decide if a potential lender is a suitable fit for you.
You can ask these questions directly to the loan provider, or you can find answers on sites such as FinImpact that offer reviews on many private lenders.
1. How long will it take to complete a loan application?
It can take a day or two, a few weeks, or even months, depending on the lender. For instance, a bank loan (or an SBA loan) can take weeks to process, but a loan from an internet lender often closes in a few business days. Some lenders you should avoid because their normal approval procedure just takes too long, this however may depend on your loan purpose. Whatever the reason, why would you wait a month to get funds?
2. Do they offer loans to companies in your sector?
Many lenders have declared certain businesses they would not operate in or which industries they specialize in. Regardless of your creditworthiness, getting an answer to this question early on can help you avoid spending time with a lender who will not be able to assist you.
According to data from last year provided by the Federal Reserve Bank of New York, the typical small company owner spends 26 hours researching and applying for loans. If that is the case, you can save yourself some time by asking important questions such as this one early in the process.
3. When is the initial installment due?
It makes sense to presume your first payment will be due at the beginning of the month after you take out the loan, which requires a monthly payment. However, if you have a daily payback plan, you need to know and be ready.
Not knowing the installment due date could be a problem for a company owner who did not anticipate the first payment deadline at a given time. But if you are aware of that daily payback expectation, you can make accommodations and sort it out on time. As you already know, unexpected obligations, especially financial ones, can be very stressful.
4. What are the total cost and interest rates?
You may evaluate and compare financing choices using a variety of pricing and comparison tools. APR (Annual Percentage Rate) is one approach to comparing loans, but it should also be taken into account when comparing loans with varied terms in total dollar cost.
Make sure you are comparing an APR to another full-APR and not just the annualized interest rate because the APR calculation takes all costs into account.
Before speaking to a loan officer at a bank or an internet lender, familiarize yourself with important terminology, so you fully understand the answer you get.
5. How was the experience of previous clients?
Though it would be a good idea to chat with one or two customers, review any customer success stories they may provide, look for client testimonials, and even conduct an internet review search before speaking to the lender.
Search to see if the reviews are generally favorable. Find if there are any complaints from previous customers. And once you speak to the lender, ask about anything that seems out of the ordinary if you notice it. They should be able to address any worries or concerns that you have.
Conclusion
Taking out a loan is a big financial responsibility, so whatever you do, you must be confident in your decision. Nowadays, there are plenty of online lenders, so choosing the right one will be crucial for your business. With the help of this article, you are one step closer to finding the best lender that will suit your needs.
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