In our last blog, we discussed some important do’s and don’ts concerning applying for and acquiring a small business loan. We’ll continue the important do’s and don’ts in this installment so you’ll be able to make the correct decisions for the growth and success of your small business. If you need equipment financing for your small or medium-sized business, contact Northpoint Commercial Credit. We understand how stressful it is to run a small business, and we want to help you get the equipment financing and small business loans that you need. Our team is here for you and we have more than 15 years of experience. Contact our team today for more information about equipment financing and small business loans.
Do's and Don'ts of Acquiring a Small Business Loan: Part Two
Don’t Assume that the Only Cost Will be Interest
Low interest rates can quickly blind you to the other costs involved with small business loans. When a bank is advertising an interest rate that seems like it’s too good to be true, they want you to believe that you’ll be paying less than you expected so you should borrow more. While this sometimes is the case, interest rates do fluctuate, and if you happen to borrow too much and can’t pay it back in time, you’ll be stuck paying much more than you expected. Make sure that you properly add the costs and fees that will come with the loan to your overall expense and loan repayment plan before you get dollar signs in your eyes and borrow too much money.
Do Ask for a Detailed List of Expenses
If you are approved for a loan, don’t simply fork over cash every month without evaluating what you’re actually paying for. You can request a list of fees and costs to be explained to you and to keep for your records. This will help you to know exactly what you’re paying for every month so you’re informed of every fee and cost.
Don’t Assume That You Can Pay Your Loan Back Early
Many business experience so much growth that they can pay back their small business loan more quickly than they expected. Beware of early loan repayment penalties. Yes, unfortunately, these exist in the equipment financing and small business loan world. Banks capitalize on receiving 100 percent of the interest of the loan, so instead of rewarding you for good money management and correctly using your loan to grow the success of your business, they will impose a loan repayment penalty. These can range exponentially, so check with your loan officer about the rate or percentage of your loan. It may still be cheaper to completely pay off the loan before it’s due, or it might be best to simply way and finish paying it off in the time specified when the loan was taken out.
Don’t Think that Your Collateral Will be Fairly Valued
One of the most frustrating aspects of applying for a business loan is when your required collateral for your small business loan isn’t fairly valued. Banks are notorious for deeming equipment, property, a house, or other forms of adequate collateral as less-than, so you’re required to take out a loan with a higher number to make up for the lack of assets you’re offering. Unfortunately, this is a way that a bank will make you take out a loan for more that you need so that the level of interest is higher and is usually takes you much longer to pay it back.
Do Stop Stressing
You’re probably at the point of feeling intense and overwhelming stress. Owning a small business and needing money to fund new projects or a new machine to automate some of your processes is important to you business’ success and growth. Talk to a trusted loan advisor who can give excellent advice and devise a plan that can be followed step by step so you don’t get overwhelmed when you try to make too many decisions at once.
Northpoint Commercial Credit understands the importance of financial planning and applying for equipment financing or a small business loan. If you’re ready to grow your business and need financial assistance to do so, contact the helpful and experienced team at Northpoint Commercial Credit. We want to do our best to help your small business grow! Call today!