For small business owners funding is no longer a problem. They have access to a variety of sources like small business loans and merchant cash advances that help them whenever they are in need of funds. The issue is which loan is the cheapest and offers the easiest terms. A business owner must carefully examine loan offers and ask a few questions before decides on a particular lender.
Is it secured or unsecured?
Regular institutions like banks offer only secured loans
, which means you need to provide collateral and this may not always be possible. Besides, it takes longer to process documents and for the loan to be granted. Unsecured business financing loans
are generally available from alternative lenders whose numbers are growing but the terms differ.
Interest or factor rate or APR may vary widely from one lender to another. When it comes to unsecured business financing loans the factor rate or the APR could be as high as 50% which means for every $ 100 one ends up paying $ 150 provided one is regular. If one delays or defaults the cost is higher. However, there are lenders who offer a reasonable rate of interest on small business financing loans, such as wscapnow, with APR being as low as 20%.
Processing fees, upfront fees?
Whether it is a secured business loan or unsecured business finance, most lenders levy a variety of charges. Borrowers may have to pay application fees, processing fees and documentation charges upfront. This could be about 2% of the loan amount. It is best to look for financiers
who waive all processing fees.
How fast is the loan available?
Speed is of the essence when one needs funds quickly
to meet urgent needs. One question to ask lenders is how long it takes to process an application and deposit funds in the bank account of the borrower. In the cast of most unsecured sources of business financing
, the period should not exceed one week. Online processes
are inherently faster.
Is high credit scoring a must?
Most lenders will require that the borrower has a high credit score, above 550. If a businessman has a lower credit rating then it is likely he will be refused a loan or may be charged a higher rate of interest. Look for lenders who do not insist on high credit scores and who will charge a reasonable rate of interest.
Some form of documentation is indispensable for the application process. In the case of unsecured funding, the minimum documentation comprises only of bank statements, proof of identity, proof of residence and proof of ownership of a business. This is all that should be required to get cash on demand.
It is best not to trust representatives of lenders who tell intending borrowers “do not worry”
and that everything will be all right. One could be in for unpleasant surprises later on. Avoid these by asking all questions and getting clarifications before choosing a source of alternative business funding