4 Tips for Entrepreneurs Choosing a Term Loan
If you are trying to get a loan for your company, then you may wonder how to decide which option is best. There are plenty of lenders and types of loans available and getting the right loan for your company is important. The following tips may help you navigate the process and come to a decision.
1. Determine the Company’s Needs
Your company’s needs can determine which type of loan is best. There are many reasons why you might need to obtain a term loan for your business. You might want to purchase property, hire more staff members, buy equipment or refinance existing debt. Think about what areas of your company need funds the most when applying for a loan.
2. Research Loan Types
From lines of credit to investors to traditional bank loans, there are many types of loans available that can serve your needs. The differences between each type can be drastic and affect your ability to get approved or use funds for more than one purpose. Research each type of term loan and compare the pros and cons before making a decision. Look at the interest rates, payment terms, minimum and maximum cash amounts and specified uses of your borrowed funds. Watch for things like balloon payments and fixed-rate loans versus variable-rate loans.
3. Evaluate Lending Institutions
While the basic conditions and structure of each type of loan remain the same, each lending institution can set its own requirements. Find lenders by talking to people in your industry and conducting searches online. If multiple lenders seem like good choices, then you can create a spreadsheet to compare their application processes and terms more effectively. Research each lender’s reputation by reading reviews online or speaking directly with existing clients.
4. Examine the Company’s Credit History
The length of time your company has existed, the credit history and current credit score can all affect the loan application process. Many entrepreneurs who have been in business for under a year may find that they are ineligible for certain types of loans due to the lack of established credit history. Find a loan that makes sense for your company based on the credit history. To improve the chances of getting approved for a loan, you can figure out what your company’s credit score is and take action to boost it.
Getting a loan can be a great way for entrepreneurs to fund their companies. If you are considering applying for a term loan, then it is important that you do the research to find the right fit for your business.
