When you need additional funds for your small business, a business loan might seem like the perfect answer. However, you shouldn’t default to the first lender you find. Instead, it’s critical to find the right business loan provider based on your needs and preferences. Plus, you need to evaluate lenders for quality, ensuring they’re reputable.
Fortunately, finding the right business loan provider isn’t as challenging as it seems. Here are three tips to get you headed in the right direction.
Research Multiple Lenders
When you’re looking for a business loan provider, don’t automatically go with the first lender you come across. Instead, it’s wise to compare your various options, including everything from SBA loans through the U.S. Small Business Administration to those offered by traditional banks or online lenders.
Generally, you want to explore the various terms and conditions that come with each lending product. Some may offer more flexibility in regard to using the funds than others. One lender may require collateral, while another may not. Interest rate, repayment term length, and other factors can also vary widely. As a result, it’s critical to examine the details before committing.
Read Ratings and Reviews
When you’re exploring lenders, a critical step is reading ratings and reviews. There’s a wide variety of online resources that track information from customers or serve as platforms for comments on the customer experience.
The Better Business Bureau (BBB) is an excellent resource for learning more about a company’s reputation. Along with BBB scores, people can leave comments and reviews discussing their experience, which is often enlightening.
Social media is also a potential resource. By looking at comments associated with the company’s profile or posts, you can often learn more about the typical borrower’s experience. Additionally, you can perform searches to find posts and comments not directly on the lender’s profile, which may give you more insights.
If you know someone who’s previously used a specific lender, you can also request insights from them directly. Often, this approach is wise since it’s potentially more trustworthy than online reviews because you know the source.
Ask the Right Questions
Before you apply for a small business loan, it’s wise to speak with the lender and ask a few critical questions. By doing so, you can learn more about the product and what it takes to apply.
If a lender offers more than one type of small business loan, consider asking what they’d recommend and why. Ideally, they should discuss the pros and cons of the options you’re eligible to use based on the loan’s purpose.
Requesting details about the application process – such as the needed documentation, processing timeline, and delivery method for funds if approved – can help you understand the road ahead. You can also ask for interest rate ranges, fee percentages, and other information about the additional costs you’ll encounter.
Additionally, find out if a personal guarantee is required if you get a business loan through that lender. Personal guarantees mean you’re directly responsible for the debt if your company fails to meet its obligation. As a result, it’s essential to know if that’s part of the agreement.
