Top Tips for Business Owners to Borrow Money With Confidence

As there are an increasing number of loan options available to small businesses, choosing the right one can seem daunting.

It’s critical to feel at ease with the lending process when you’re ready to borrow money for your business. It’s more than simply securing a loan when it comes to deciding which bank or financial institution to borrow from – it’s about finding the best overall match for your company.

It’s worth looking into your alternatives to discover which lender can help your company today and in the future. Here are some helpful hints for shopping and applying for a business loan with confidence.

1. When you meet with lenders, ask questions and take notes.

You can compare options by keeping a log of your encounters with possible business lenders. Take notes during each meeting, even if it is online, making sure to include details such as:

• Remembering to ask for the interest rate as an annual percentage rate (APR)
  Understanding closing costs
  Any fees that may be charged on an annual basis
  The lender’s capacity to provide ongoing assistance and expertise in commercial banking, including relationship management.

2. Be on the lookout for loan fee scams.

Applying for a business loan usually has no upfront fees attached to it, and you should avoid lenders who charge you to fill out an application. Reputable banking institutions offer online applications that are free of charge to businesses.

If you apply with a bank or another reputable lender, you should be assigned to a relationship manager who can assist you with the application if you require it.

Working with a loan broker is also an option. A reputable loan broker will usually work without charging you any upfront fees, instead receiving a commission from the lender. When selecting a loan broker, do your homework to establish their reputation – a smart first step is to verify their physical company address and speak with them. Your accountant can also be a great source of information and potentially even referrals.

3. Avoid having too many queries on your personal or corporate credit score.

Multiple credit queries will lower your credit score, but you can get your business and personal credit scores by contacting the credit bureaus directly or getting a copy of your credit report—you can get a free copy of your personal credit report once a year. Getting a copy of your credit report or checking your credit score isn’t considered a “hard inquiry,” therefore it won’t hurt your score.

Lenders will pull their own credit report on you once you apply, but you can utilize a credit report/score you pull to get an idea of interest rates before you apply. After you apply and a loan offer is provided, the lender will share your possible interest rate with you.

Remember: Once you’ve opted to apply for a loan with a lender, you only need to allow them to pull your credit score at that time.

4. Don’t rush into applying for a business loan; take your time.

Because obtaining a business loan establishes a long-term relationship with the lending organization, you should engage with a lender that makes you feel at ease from the outset.

Avoid working with a lender who pushes you to do something you don’t want to do, such as applying for a “loan special” or an offer that “simply can’t be passed up” before a specific date.

In these cases, having a few essential lines written and rehearsed ahead of time might be beneficial. “I’d like to review all of my alternatives and then follow up with you,” you can say.

It’s also worth noting that applying for a loan in one sitting is uncommon. So, unless you’ve done a lot of prior research, you can feel comfortable scheduling 2-3 meetings (or more) until you’ve received answers to all of your questions. Learn more about how a bank evaluates a small business loan request to help you boost your application.

5. Obtain a second loan quote from a different lender.

Many borrowers, who make be very much in need of one, are inclined to go with the first institution that will lend to them, but getting a second alternative is critical. Even if you’ve had a lengthy connection with your bank, it’s a good idea to double-check that they’ve made you a competitive offer.

Obtaining quotes from at least two different banks or other lenders might assist you in ensuring that you are receiving the most competitive rates and fees available.

Overall, when it comes to borrowing money for your business, taking the time to select the correct loan and lender is definitely worthwhile. Keep these pointers in mind as you look into your possibilities so you can feel comfortable borrowing money to meet your company’s demands and objectives, and don’t be afraid to reach out to your accountant for expert advice on the best move to make for your unique business.