Running a business is a lot more difficult than we are led to believe. Even having an established business can be quite difficult to continue running and growing. Having cash available is important as well, though easier said than done. This is why online business loans are so in demand.
If you think that your business may need an infusion of cash and have been considering one of these places, there are a few things that you should know.
Know the True Cost
One of the biggest mistakes that small businesses make is that they jump at a loan because they need cash quickly. While the need is certainly understandable, one thing no business wants to have happen is becoming entangled in a subpar loan.
What looks like a 10% interest rate, for instance, may wind up costing a lot more than the stated 10%. When applying for a loan, ask what the annual percentage rate (APR) is on the loan. If they aren’t able to clearly provide an answer in writing, then you will want to try your luck at a more reputable lender such as Thinking Capital.
Know the Repayment Terms
The length of online business loans can vary based on lender and situation. Loans can span a few months, a year, or much longer than that. But the majority of online lenders will be looking for payments, mostly on a monthly basis. That said, terms could specify a weekly or even daily payment.
Make sure that you know what the repayment terms are. Paying late could mean major fees and not paying at all could potentially leave borrowers in a far worse spot than when they first began. Read the terms first.
Know Your Payment Options
The vast majority of online lenders are going to require direct access to a bank account. This is so that they can secure draft payments to collect on their loan. That said, borrowers should be very cautious when it comes to giving banking information to lenders.
And watch out for payment frequency. Taking on a loan that has daily payment requirements could potentially cripple cash flow for the business, which then makes repayment all the more difficult. And that is not even counting the potential impact on your credit score in the future. This is the “fine print” to be aware of.
Know the Fees
The loan itself is not the costly part; it is all of the fees and rates that go along with the process. And if you are not careful or paying attention to what those fees are, they can really add up before you even blink an eye.
More often than not, fees will be added to your loan. These fees cost you a ton more and can even increase your APR. Make sure that you compare lenders when possible to help take the guesswork (and potential for a bad deal) out of the process.
Know What You Can Afford
Far too many individuals and businesses take out loans without a second thought. Need money, get money, right? But that can put both you and the business in an even more compromising situation than it started in.
Take the time to assess the cash flow of the business and that you can actually afford to take on the payment of a loan. While infusing cash may help in the short term, those higher repayments can catch up and put you in a difficult position. Take the time to assess all of the details of the loan to see how they impact the business.